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Calendar No. 704. 

62d Congress, [ SENATE. J Report 

2d Session, j ( No. 840. 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

y^ 

June 3, 1912. — Ordered to be printed. >J^^ ^ 



Mr. Smoot, from the Committee on Finance, submitted the following 

REPORT. 

[To accompany H. R. 22195.] 

The Committee on Finance having considered H. R. 22195, report 
the same back adversely and recommend that the bill do not pass. 

o 



I 



Calendar No. 704. 

62d Congress, y "^ ^> SENATE. ( Kept. 840, 

2d Session, )J^^ ^ V \ Part 2. 



^^~::^ — v~ 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



^^■^' 



June 3, 1912. — Ordered to be printed. 



Mr. Simmons, from the Committee on Finance, submitted the follow- 

ins: as the 



'& 



VIEWS OF THE MINORITY. 

[To accompany H. R. 22195.] 

The undersigned members of the Committee on Finance, to which was 
submitted for consideration H. R. 22195, being a bill to reduce duties on 
wool and manufactures of wool, recommend that the bill do pass. 

In the presidential campaign of 1908 the platforms of both the Demo- 
cratic and Republican Parties declared for tariff revision. In that 
campaign the Republican Party was successful, electing its candidate 
for President and a majority in both branches of Congress. Immedi- 
ately after his inauguration, President Taft, pursuant to the pledges 
of his party, called a special session of Congress to revise the tariff. 

The platform promises of tariff revision heretofore referred to 
had been given in response to unmistakable demands for relief from 
tariff burdens, and the people naturally expected such a revision as 
would substantially reduce tariff taxation. In this expectation they 
were doomed to grievous disappointment. There was indeed a 
revision, if a slight change in duties, some upward and some down- 
ward, could be called a revision, but it was a revision not in the 
interest of those who bear the burdens of tariff taxation, but in the 
interest of those who reap the benefits of tariff taxation. 

The act of 1909, slight as were the tariff changes considered as a 
whole by that act, made practically no change in the rate of duties 
carried in the Dingley Act on wool and manufactures of wool, although 
those duties were regarded as exceptionally excessive, unjust, and 
onerous. The sponsors of the Payne-Aldrich bill had ample warning 
before that measure was enacted that it would be unsatisfactory to 
those who had demanded and had been promised tariiT revision, 
but the obligations of the Republican Party to the protected interests 
were so great and their copartnership with the woolgrowers' and 
woolen manufacturers' associations was so close that they gave ear 
to the appeal of those who feed on protection rather than to the 
protest 01 the people. As soon as this measure received the sanction 
of the President and become a law the dissatisfaction, which had been 
growing more and more ominous as its consideration in Congress 
progressed, became a veritable storm of indignant disapproval. 
Everywhere it was denounced as a base betrayal of the pledges upon 
which the Republican Party had secured its continuance in power. 



2 DUTIES ON WOOL AND MANUFACTURES OF WOOT.. 

At the election in 1910 the Payne-Aldrich revision, so called, 
became the paramount issue, culminating in the overwhelming over- 
throw of the Republican Party and the elevation to power in the 
House of Representatives of the Democratic Party. The result of 
that election was a clear mandate to the Democratic House of the 
Sixty-second Congress to proceed immediately with a revision of the 
tariiT upon the line indicated in the national platform of that party. 

In April, 1911, President Taft called Congress in special session for 
the purpose of passing the Canadian reciprocity agreement. The 
people, oppressed by the burdens of excessive and unjust taxation, 
and disgusted with the delays and pretense of the Republican Party, 
demanded immediate and effective action for relief from these bur- 
dens, and the House of Representatives, responding to that demand 
and ignoring the dilatory recommendation of the President that it 
should confine itself solely to the consideration of reciprocity; 
addressed itself at once to the duty of revising those schedules against 
which the public complaint was greitest. 

In the campaign of 1910 Schedule K had been more generally and 
vigorously attacked and more feebly defended than any other 
schedule in the whole Payne-Aldrich bill, and the President himself 
had declared the duties in that schedule indefensible. In view of 
these conditions the Wa\'s and Means Committee of the Plouse, after 
acting upon the reciprocity bill which had been referred to it, im- 
mediately entered upon consideration of this schedule, and after a 
most thorough investigation prepared and presented H. R. 11019, 
providing for the reduction of the excessive duties of that schedule. 
That bill, while complying with the Democratic platform promise 
mth reference to restoring the tariff to a revenue basis, was a mod- 
erate and conservative measure. The duties fixed were such as would 
yield a reasonable revenue to the Government without imposing 
unnecessar}^ burdens upon the consumers. It met fairly the demand 
of the people and was reasonably satisfactory to those who had asked 
and had been promised a revision of the tariff and especially of this 
schedule. In August, 1911, this bill, slightly modified in the Senate, 
passed both branches of Congress but was vetoed by the President 
upon the ground that the Tariff Board had not made its report upon 
this schedule. 

At the beginning of the present session of Congress President Taft 
submitted to Congress the report of the Tariff Board upon this sched- 
ule, and recommended that Congress, on the basis of the findings of 
that board, should now proceed to a consideration of this schedule 
with a view to its revision and a general reduction of its rates. The 
majority members of the Ways and Means Committee of the House, 
after a careful analysis of the report of that board, found nothing in 
that report that in its judgment required any change in the bill 
(H. R. 11019, 62d Cong., special sess.), which, with the slight modi- 
fications made in the Senate, had received the concurrence of both 
Houses of Congress during that session, but had been vetoed by 
the President, and it therefore reintroduced that bill, now known 
as H. R. 22195, being the bill now pending before the Senate. The 
report of the majority members of the Ways and Means Commit- 
tee upon this bill is so able, so comprehensive, so conclusive, and so 
unanswerable as an argument for the legislation it proposes that we 
adopt it as our own and make it a part of this expression of our views. 
It is as follows : 



House Report No. 455, Sixty-second Congress, second session. 

H. R. 11019 Reintroduced. 

Except for the change in date of effectiveness and the correction 
of minor clerical errors, this bill, H. R. 22195, is identical with H. R. 
11 01 9, introduced at the first session of the present Congress. Down- 
ward tariff revision was the chief issue in the 1910 campaign. The 
overwhelming manner in which the Democratic Party was given the 
control of the House of Representatives in the election of that year 
severely repudiated the Republican failures at tariff reform in the 
Payne- Aldrich Act of 1909 and plainly instructed the Democrats to 
proceed at the earliest practicable moment with a downward revision 
of the tariff. Hence it was that upon the convening of the Sixty- 
second Congress in the special session of April 4, 1911, this committee 
at once applied itself to the work of revising Schedule K in an effort 
to make immediately effective the mandates of the people with 
regard to tariff revision. 

The bill H. R. 11019 was the result of elaborate and painstaking 
investigations by the committee, during which was assembled and 
examined all the information available with regard to the production 
and manufacture of wool. The rates of duty worked out by the com- 
mittee 'and embodied in H. R. 11019 were fixed without any refer- 
ence whatever to protection, but with an intent to reduce the '* inde- 
fensible'' rates which have been so long a burden to the consumer and 
with the only other view to producing the necessary revenue from 
this schedule. 

A modified form of H. R. 11019, carrying slightly increased rates 
of duty, was passed by the Congress, submitted to the President of 
the United States, and vetoed by him on August 17, 1911. The veto 
was defended on the ground that the Tariff Board had not completed 
its investigations of Schedule K. In this veto message the President 
quoted from his message to Congress of December 7, 1909, as follows: 

I believe that the work of this board will be of prime utility and importance when- 
ever Congress shall deem it wise again to readjust the customs duties. If the facts 
secured by the Tariff Board are of such a character as to show generally that the rates 

3 



4 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

of duties imposed by the present tariff law are excessive under the principles of pro- 
tection as described in the platform of the successful party at the late election, I shall 
not hesitate to invite the attention of Congress to this fact and to the necessity for 
action predicated thereon. 

In his veto message of August 17, 1911, the President also said: 

When I have the accurate information which justifies such action I shall recommend 
to Congress as great a reduction in Schedule K as the measure of protection, already 
stated, will permit. The failure of the present bill should not be regarded, therefore, 
as taking away the only chance for reduction by this Congress. 

In its report on H. E-, 11019 (H. Kept. 45, 62d Cong., 1st sess.) the 
committee said: 

It would be trifling with the people to give further consideration to Republican 
counsels of more delay in this matter, whether with regard to statistical data concern- 
ing cost of production, promised at a future date, or for any further reason. 

Notwithstanding this conviction, the Democratic majority of the 
House of Representatives, impatient to respond to the demands of 
the people for a speedy revision of a schedule of indefensible rates, 
was forced to delay further effort in answer to the protests of the 
American people. 

In his message of December 20, 1911, the President said: 

I now herewith submit a report of the Tariff Board on Schedule K. The board ia 
unanimous in its findings. On the basis of these findings I now recommend that the 
Congress proceed to a consideration of this schedule with a view to its revision and 
a general reduction of its rates. 

The committee has made a careful analysis of the report of the 
Tariff Board in order to interpret the findings and to discover in 
what particulars the committee's bill, H. R. 11019, was defective or 
failed to adjust the duties in an equitable and proper manner. This 
analysis has failed to reveal anything that requires a single change 
in the rates fixed in H. R. 11019, and the committee is constrained to 
present again the results of its investigation of last summer, as 
embodied in the bill presented to the House at that time. 

Apparently the only real effect of the 12 months' delay in the 
revision of Schedule K, based upon the necessity, as stated by the 
President, of awaiting the report of the Tariff Board, has been to 
allow manufacturers another year of excessive rates and to compel 
the people to pay for their woolen clothing during the year about 
$50,000,000 more than they would have paid under the rates of H. R. 
11019. 

As shown in the analysis, the data of the report of the Tariff Board 
have been found to be diffuse and unsystematic, to present insig- 
nificant findings, and, as stated, to afford the committee no valid 
reason for any change in its recommendations of last session with 
regard to the rates of Schedule K. 

Analysis of Tariff Board's Report. 

scope of analysis. 

The following discussion of the Tariff Board's report on Wool and 
Manufactures of Wool is divided into three parts: (1) The general 
character of the report on wool and manufactures of wool (pp. 5-8) ; 
(2) the circumstances under which it was prepared, its characteristics 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 5 

and the general features which entitle it to confidence or the reverse 
(pp. 9-32) ; and (3) an interpretation of the board's report, and an 
attempt to apply it to the tariff situation (pp. 33-66) . The three parts 
of the discussion are necessarily independent of each other. In con- 
sidering the broad question of tariff revision, a decision must first be 
reached as to the acceptance of the so-called cost of production theory 
as a basis for such revision. Conclusions on this point are made in 
the first part. Again, if the cost of production theory is acceptable 
in the abstract, or may conceivably be made so, the question remains 
whether the report is worked out from the statistical standpoint 
thoroughly and carefully so as to present trustworthy results. Fin- 
ally, independent of the conclusions reached on cost of production in 
the abstract, and whether or not the report is satisfactory in its 
technic[ue, the question will remain as to what actual significance 
regarding tariff duties is to be given it granting, for the sake of argu- 
ment, that its conclusions are accepted. 

Cost of Production Theory. 

The greater portion of the report consists of a study of what is 
called ''comparative cost of production" of wools and manufactures 
of wool in various countries, tlie chief stress being naturally laid upon 
conditions in the United States. The report deals exclusively with 
this subject, if the language be so interpreted as to include matters 
which are ancillary to cost of production in the narrow sense of the 
term. While the report contains considerable descriptive and other 
matter such as quotations of prices and the like, these are contributory 
to the analysis of cost and are evidently intended merely to enable 
readers to make use of the cost figures more intelligently. 

It is, therefore, fair to note at the outset exactly what is meant by 
using the cost of production theory as a basis tor adjusting tariff 
duties, and what validity it has as a practical guide to legislation. 
By cost of production the board invariably understands money cost 
of production, or as some economists have expressed it, "money 
expenses of production." These expenses of production are ascer- 
tained in various ways and for various products in the several 
countries studied, and comparisons are then drawn between the 
figures thus secured. 

In passing upon the validity of this mode of procedure, it is neces- 
sary to review some familiar economic reasoning. 

The view, that* the proper basis for tariff duties is found by com- 
paring money costs of production, rests upon the opinion that money 
costs represent the relative degrees of sacrifice involved in turning 
out commodities of a given kind in various countries. For instance, if 
it be assumed that a given unit of a certain commodity can be pro- 
duced in England for one dollar, or the equivalent of that sum, while 
in the United States the money expenses of production are $1.25, it is 
necessary to have a tariff duty equal to the difference in these money 
expenses of production, or certainly to the difference in money ex- 
penses minus the allowance for variations in freight rates, in order to 
place the producers in the two countries upon an equal market footing. 
If this is not done, it will be possible for the producer in the country 
where money expenses are lowest to drive out of business the pro- 



6 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

ducer in the country where money expenses are highest. This as- 
sumption is based upon an erroneous view of international trade, and 
finds no warrant whatever in economic reasoning. 

RELATION BETWEEN PRICES AND COSTS. 

In certain classes of goods prices or selling values are fixed, not by 
the cost of producing at the point of lowest cost, but by the cost of 
producing at the point of highest cost. This is true of every com- 
modity subject to the law of diminishing returns. In the case of such 
commodities, the price is fixed ultimately by the cost of producing 
that portion of the supply brought into existence under the least 
favorable conditions, provided that all portions of the supply are 
necessary to satisfy a given demand. Thus, if the price of wheat is 
75 cents a bushel, wheat will command that figure regardless of 
whether it is produced at 25, 50, 75 cents, or $1 per bushel. The 
price is fixed by a comparison of demand and supply, and cost of 
production merely affords one of the limits which ultimately deter- 
mines the range of prices. This is a familiar condition in connection 
with agricultural commodities, in which production continues on un- 
fertile lands, though very much better soil may be in use. The better 
soil does not drive the poorer out of cultivation, unless there is so 
much of the better as to render it unnecessary to cultivate the poorer 
soil. Where soils of different grades are employed, the price of the 
product has nothing to do with cost of production, but is determined 
by the cost of production of the most expensive unit of the desired 
supply. In these cases a study of the difference in cost of produc- 
tion would have no relation whatever to the amount of tariff needed 
to protect industries in one country against the competition of those 
in another. 

The production of numerous commodities is carried on in countries 
having a much smaller natural aptness for them than do others, because 
the latter, which might compete successfully with them, have a far 
greater advantage in producing some other commodity. Thus, if State 
No. 1 can produce both corn and wheat more cheaply than State No. 2, it 
does not follow that it will do so. If the former's advantage in the pro- 
duction of wheat is disproportionately greater than in the production of 
corn, it will devote attention chiefly, or wholly, to wheat — the com- 
modity in which it has the greatest surplus of productive power. In this 
case a study of the difference of money expenses of production will 
throw no light whatever upon the amount of tariff needed in order 
to equalize conditions of production. There are numerous instances 
in which a condition of this kind exists — a country having the 
decided advantage in a certain commodity, but producing it only to 
a very limited extent, because there is so great a field for its capital in 
other directions. In such cases the fact that the money cost of pro- 
ducing a given article in the country of great advantage is lower than 
in the least favored country does not prove the necessity of a tariff 
duty upon this article in the less favored country, because the more 
favored will not produce it to any considerable extent in any event. 

Even in those instances where two countries are extensively 
engaged in producing a manufactured article, whose price is deter- 
mined by cost of production under the most favorable conditions, as 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 7 

is the case with many largely manufactured articles such as shoes, 
cloth, and the like, a difference in money cost of production does 
not necessarily indicate anything as to comparative competitive 
power. That it may do so, there must be an ascertainment of the 
relative efficiency of labor, and the extent to which given money 
expenses are the result of already existing tariff duties. If expenses 
of production have been rendered higher by tariff duties, so that the 
cost of producing an article is enhanced by tariff duties on the raw 
material, the fact of higher money expenses of production does not 
necessarily indicate inferiority in productive power as to that particular 
article. 

VARIATIONS IN COSTS. 

Beside these considerations, in every country there is a great range 
of difference in cost of production. Scarcely any commodity can be 
said to have a uniform cost of production. There is more difference, 
as a rule, between different factories in the same country than there 
is between the best and poorest factories in one country and those of 
corresponding grades in another. This has been amply illustrated 
by the work of the Tariff Board. In its report on pulp and paper, 
the board found little difference in money cost of production between 
the United States and Canada in the best mills, but it did find very 
great difference between the best and poorest mills in the United States. 
The indication would have been, therefore, that while protection was 
not needed by the best factories in the United States against Canada, 
it was needed by the poorer factories against the better factories in 
the United States, but not against those in Canada. Owing to this 
variation in cost of production within the same country, it is not pos- 
sible to compare in exact terms the productive power of one country 
with that of another. 

Only averages can be taken, and these show nothing whatever as 
to any given case. The cost of production theory in order to mean 
anything must be qualified by provisions showing whether it is 
intended to apply to differences between the best factories in two 
countries, or the difference between the poorest factories in one 
country and the best in another. Otherwise it will indicate noth- 
ing, even upon its own theoretical basis, since a tariff which would 
protect the best factory in one country will not protect the poorest 
factory there, or perhaps the average factory. A duty which will 
equalize the average difference Lq cost of production between two 
countries protects no one, since it is more than is needed by the most 
efficient producer and less than is needed by the least efficient pro- 
ducer. 

Even if it be granted that an ascertainment of differences in money 
cost of production — whether highest, average, or lowest — would fur- 
nish a guide to the proper amount of tariff duty needed for protective 
purposes, the problem would remain whether money expenses of pro- 
duction could be ascertained in such a way as to render the method 
available. Experience, as well as theoretical considerations, show 
that this is not the case. 



8 DUTIES ON WOOL AND MANUFACTUKES OF WOOL. 

COSTS NOT ASCERTAINABLE. 

The following are some of the reasons why costs are not obtainable: 

1. In getting at money expenses of production they must be ascer- 
tained from books designed to show manufacturing costs. No uni- 
formity exists in methods of cost accounting, and many factories do 
not employ any cost-accounting system. Cost figures obtained with- 
out cost books are of very little service. Such figures obtained from 
sets of books which are kept in a different way are equally of httle 
service. This condition exists in the textile industries to a very great 
extent — a condition admitted by the Tariff Board throughout their 
report. 

2. Even if money costs could be actually ascertained in an unques- 
tionable manner and upon a comparative basis, they must be obtamed, 
not from one competing country, but from ever;^ competing country, 
so that the average extent or scope of competition might be known 
against which the United States must exert its energies. It might 
very well be that one country would have a low money cost of pro- 
duction, but this would be of little significance, as that country could 
not indefinitely increase the amount of its production. 

3. Even if the facts could be accurately ascertained for all com- 
peting foreign countries, the figures would be of little service as a 
guide in fixing tariff duties, because it would not be known in any 
given case whether such costs afforded the basis for fixing prices. 
Wherever monopoly conditions obtain, wherever the export-price 
system exists, and wherever patents are an important factor in pro- 
duction, the mere ascertainment of the cost of production is of little 
importance. It is far more significant in such cases to know the 
range of actual selling prices over a long period. 

4. Inasmuch as differences in money cost of production have no 
particular significance unless they correspond to relative sacrifice 
of labor and capital, and inasmuch as they do not thus correspond 
except in countries whose price levels are about the same, there is no 
safe conclusion to be drawn as to the extent to which a country pos- 
sessing a low money cost will be able to undersell or compete with a 
country subject to a high money cost. 

FUTILITY OF INQUIRY. 

For these reasons the effort to obtain detailed money costs of pro- 
duction as a basis in fixing rates of duty must be considered futile, 
even if it could be successfully carried out in the inclusive way 
spoken of. While it i* perfectly true that manufacturers are al- 
ways eager to know the cost of production in the plants of their 
competitors, they are not desirous of giving their own, because 
they recognize the fact that unless they can keep costs down to 
an average level they are likely to be displaced. In international 
trade the question of competition is not raised between individuals, 
but between groups of individuals, in the two countries. This is, 
therefore, an entirely different proposition and one which has compar- 
atively little reference to the question of money cost of production. 
When the statement is made by advocates of the money cost of pro- 
duction theory that a duty is desired which wiU not only equalize 
costs but also allow for a margin of reasonable profit, the difficulty 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 9 

is intensified. At all times there are some producers who may be 
carrying on business at a loss. If it be intended to have the duty 
sufficiently large to enable the poorest producers to obtain, theo- 
retically, a reasonable profit, an excessively high rate is indicated, and 
this allows the more efficient factories to get very much more than 
their reasonable profit. 

The situation is clearly brought out in the case of railroad rates, 
where the effort is to fix the rates upon a reasonable basis; yet this 
almost invariably results in giving to the well built and efficiently 
managed roads too large a margin of profit, while it does not give 
sufficient margin to those overcapitalized, badly constructed, or ineffi- 
ciently managed. The addition of a reasonable profit over and 
above the difference in the cost of production very greatly complicates 
the problem and renders what was already impossible in theory posi- 
tively absurd in application. 

REPORT NOT A TARIFF DOCUMENT. 

Probably the most striking feature of the report of the Tariff Board 
is that it contains Httle with reference to the tariff. It is primarily 
an analysis of the money expenses involved in the production and 
manufacture of wool. With the exception of a brief section relating 
to the question whether raw-wool rates should be levied on an ad 
valorem or specific basis, and with the further exception of the study 
of shrinkage in wool which is presented as ancillary to the question 
of ad valorem or specific rates, the report has nothing to say respect- 
ing the tariff and its effects either upon capital or labor, or upon the 
consumer as he is affected by prices of goods. The report, as now 
published and before Congress, consists of four volumes. The first 
is a so-called ''glossary'' in which are given explanations of the 
meaning of terms used in connection with tariff legislation, pro- 
duction, importation, consumption, and the like, for the United States 
and other countries. The second volume includes a study of the 
cost of producing raw wool, the third a study of manufacturing costs 
in the woolen industry, and of costs or outlays in the ready-made 
clothing trade. 

The fourth volume undertakes a study of wages and efficiency in 
the woolen and worsted business of the United States. At a later 
point occasion will be taken for a more complete analysis of certain 
portions of this report. . 

VALUE OF REPORT. 

Volume I, containing the message of the President, letter of sub- 
mittal, summary of findings, and glossary, will undoubtedly be of use 
in explaining to the public the significance of the existing tariff and 
of the terms used in it. The volume probably contains little that 
was not already available to any Member of Congress who chose 
to avail himself of the facilities at his command. It is essentially a 
clerical or library compilation from printed sources, and as such affords 
little of service to the practical legislator other than its convenient 
form. 

Volume IV, Wages and efficiency of labor and machinery in the 
United States, treats a subject which has already been exhaus- 



10 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

lively discussed by the United States Immigration Commission in 
reports on the woolen industry, and the Tariff Board undoubtedly 
drew upon this source. Whatever may be the intrinsic value of 
this volume and however serviceable it may be to students for 
reference, as a contribution to tariff discussion at the present time 
it has no value, because it does not contain, or profess to contain, 
comparative material on efficiency in foreign countries. It deals only 
with American conditions. Taken in a general way, as showing the 
status of labor in the woolen and worsted industry, it is less com- 

Erehensive than the reports of the Immigration Commission. The 
oard has carried the study of earnings in some instances to a more 
advanced point than the report of the Immigration Commission, yet 
this has not materially contributed to the usefulness of the report. 
This refers particularly to the question of wages per hour, per unit 
of product, etc., data for which are not found in the Immigration 
Commission's report, but which, whatever may be thought of them, 
can not aid now, because of the entire lack of comparable data. 

Volume III contains a discussion of manufacturing costs, tops, 
yarn, and cloth, and ready-made clothuig. About one-fourth of the 
volume is devoted to a studv of ready-made clothing — a subject 
fully covered by the Immigration Commission in a report prepared 
at great expense which has been available for some time. The ready- 
made clothing report of the board contains an analysis of cost by 
sample or specimen pieces of clothing, of which a more complete dis 
cussion will appear later. But, without going into the question of 
the ready-made clothing inquiry at present, there seems to have 
been no good reason for devoting to this subject the attention 
given it by the board. The principal discussion has related to the 
duties on raw wool and manufactures of wool. The rates of duty 
on ready-made clothing have been of relatively little importance. 
Our imports of that article have not been large, amounting to only 
$1,776,236 during the fiscal year ending June 30, 1910, and would 
not have been large in any event on account of differences in style. 
As the board itself points out, the industry is highly competitive, 
and may be regarded as a minor factor in the tariff issue. 

Apparently the chief reason for this inquiry was the opinion that 
it would show the cost of«woolen goods to be but a verj^ small factor 
in the cost of ready-made clothing. Waiving this issue for the 
present it may be concluded that, so far as the question of tariff 
rates on wool and manufactures of wool is concerned, that part of 
the board's report which relates to ready-made clothing is largely 
irrelevant. 

SIGNIFICANT FEATURES OF THE REPORT. 

Those portions of the report which have a bearing upon the 
immediate question before Congress and which should be studied in 
relation to the problem of the tariff are comprised in Volume II and 
in the first half of Volume III. Included in these volumes is much 
that has no immediate bearing on the subject. The " Notes on 
sheep ranching in the West," for example, are fragmentary and 
contain no direct references to comparative costs that throw light 
upon the tariff. In the second volume of the board's report, which 
deals with raw wool, the material deserving of consideration is com- 



DUTIES ON WOOL AND MANUFACTURES OP WOOL. 11 

prised within pages 300 to 541, a total of 241 pages, while in Volume 
III on manufacture, the significant portions are included in the 223 
pages between pages 619 and 842. Even on the pages quoted there 
is much that has only a very general bearing upon the subject of 
industrial costs, and of this a rather large proportion has been previ- 
ously published either in this country or abroad, thus being already 
available to those who might wish to examine it; in many instances 
material so published was already in the files of the Ways and Means 
Committee. Practically all of the material as to prices, imports, 
exports, and foreign conditions was readily available, as was also a 
large part of the information on shrinkage. 

COSTS OF CAPITAL AND NATURAL AGENTS. 

Throughout its investigation of costs of production, the Tariff Board 
apparently considers the maintenance of the existing tariff, or some- 
thing approximating it, fundamental and necessary. Thereby it adds 
very greatly to the ''cost" stated as representative of the necessities 
of the American wool and wool-manufacturing industry under existing 
conditions. This is an error which runs consistently throughout the 
whole report and which needs to be considered very carefully in order 
to realize the far-reaching character of the modifications which it 
involves. 

Fundamentally, the mistake of the board in considering the tariff 
as a permanent feature is found m the attitude it adopts toward the 
cost of capital and of natural agencies. Starting with the raw- wool 
industrj^, the board regards the cost of land or the price paid for the 
use of it as an integral element in wool raising. In Volume II 
(p. 309), under the head "The problem of land values," the report 
says that in some regions ' ' the sheep owners possess but little land, 
often only enough to give them control of water rights, etc., while 
in other parts the land owned by them represents a large investment 
and occasions a heavy charge against the sheep; but aU the flock 
owners depend to a greater or less extent on land which they do 
not own." 

In getting at the method employed in dealing with this question 
of land values, the board allows a charge against the sheep 
designed to cover the grazing value of the land. This allow- 
ance "has been determined on the basis of prices actually paid 
for the use of similar land leased or rented in the same region." 
It is apparently included in the estimates of cost under the head of 
"Miscellaneous expenses." Here is a mistake similar to that made 
by the board in its report on pulp and paper. The value of land, 
whether estimated as a lump sum, as a rental, or partly, as in this case, 
a grazing value, is determined solely by the demand for the products 
of the land, and the consequent price that can be obtained for such 
product. A farm is worth S50 an acre for the sole reason that the 
products raised on the farm can be made to bring an income, which, 
all things considered, will pay interest on $50 per acre. Grazing land 
leased for the use of sheep owners will bring 20 cents an acre merely 
because of the fact that the sheep are there, and there is a demand for 
the land ; but the grazing demand is due to the fact that the industry 
is being carried on subject to tariff protection under conditions which 



12 DyTIES ON WOOL AND MANUFACTURES OF WOOL. 

enable the owners of land to exact such a charge. Keduction of the 
tariff would eliminate this payment so far as based upon a fictitious 
or artificially established value. 

In the case of pulp and paper, it was found by the board that one 
reason for the high cost of paper in the United States was the fact that 
papermakers charged themselves the prevailing rate for pulp wood, 
and so recorded this charge on their books as an element in cost, not- 
withstanding that the woodlands were owned by themselves ar*d had 
been bought years ago at a low figure. They increased in value 
merely because the scarcity of wood produced by excessive tariff pro- 
tection rendered it impossible to get the wood without paying an 
abnormally high price, which in turn raised the value of the land. 
This enabled the paper manufacturers to claim that the high price 
which they paid themselves for the wood was really no more than was 
necessary in order to pay the interest on their investment in the wood- 
lands, it was a clear case of the use of the tariff to maintain an arti- 
ficial or monopoly value. A somewhat similar condition is seen in the 
allowance for grazing cost which is included by the board as an 
integral part of the cost of raising wool. No progress can be made in 
studying the tariff problem so long as this point of view is adhered to, 
for the very basis of the argument assumes the continued recognition 
of artificial values of capital and natural agents from the very 
moment they are estabhshed through the imposition of an excessive 
duty. 

TREATMENT OF IMPROVEMENTS. 

The kind of error just discussed is also seen in the treatment by 
the board of improvement and equipment. The board has ascertained 
the value of improvements apart from that of the land and then 
allowed a 10 per cent depreciation. It points out (p. 310) that many 
articles of equipment depreciate rapidly on account of their nature or 
carelessness in their^ use and there is good reason to believe that 
carelessness has been of much importance in raising the cost of 
wool production in the United States. Highly protected as the 
industry has been, producers have not exercised the same moderation 
in investment nor have they kept the industry upon the careful busi- 
ness basis that foreign countries have. This is borne out by the 
board's addenda on sheep farming in the various wool-raising sec- 
tions of the country (pp. 545-616 in Vol. II). In the notes on sheep 
farming in the Western States (pp. 593-608), conditions are indicated 
which show that the industry is not upon the same businesslike basis 
existing in foreign countries. In many instances the business is 
not under the personal management of the owner, and the result is 
a large advance in cost of production because of the expensive 
methods of conducting the enterprise. The same situation, probably 
in an aggravated form, is found in the more eastern districts, where 
the raising of sheep is frequently a side issue and no serious attention 
is given to carrying on wool-raising upon a well-organized footing. 

This means that the allowances made by the board for investment, 
equipment, etc., do not afford a good guide to the real cost of produc- 
tion, inasmuch as they fail to show conclusively that such costs are 
the lowest that can be secured. There was the same situation in the 
paper industry where much of the cost of capital was due to the fact, 
there clearly set forth, that the machinery employed in many mills 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 13 

was obsolete in character and therefore cost much more to run than 
did that in the more recently built mills. Canada's advantage over 
us was found to be in part due to the fact that as the industry was 
more recent with her, nearly all of her mills had installed modern 
machinery. Likewise the tariff has guaranteed a home market for 
wool, and practically closed it to outside wool so long as any domestic 
product could be offered in competition, so stimulating and confirm- 
ing wool raisers in careless and uneconomical methods of doing busi- 
ness, whereas under more competitive conditions they would have 
cut their costs at all points where reasonable savings could be made. 

In this connection it is worth while to note that in Texas, New 
Mexico, and Colorado, where the industry is presumably upon a de- 
cidedly commercial basis, the laborers required in carrying it on can 
be employed according to the board (p. 593) ''at very reasonable 
rates," the laborers being largely Mexicans. In California, Mexicans 
and Basques are largely employed, and in not a few other States 
foreigners are engaged in the work at low wages. 

The alleged higher cost of investment and equipment can not 
be explained by a larger amount of capital needed on account of 
excessive sums tied up in wage payments, but must be explained in 
the way already indicated. The board makes something of a point 
of the fact that no allowance is made for interest on capital invested. 
It is a fact, however, that every other possible allowance is made 
for capital used and, as thus indicated, is made at a high rate. 

ERRONEOUS FIGURES ON MANUFACTURING. 

The error of constantly regarding the tariff as a necessary factor 
in cost is found when the industiy is studied from the manufac- 
turing standpoint. There the tariff element is allowed to figure 
in connection with the cost of building and equipping a mill, which 
is found to be very much higher in the United States than abroad, 
amounting probably to double the outlay necessary there for 
that purpose. The report states (p. 705) that "a very important 
element in woolen and worsted manufacture is the erection and 
equipping of the mills and the comparative cost in the United 
States and abroad. It then furnishes detailed estimates of compara- 
tive costs, contrasting the United States and England. Differen- 
tiating between buildings, machinery, fire protection, equipment of 
all kinds, etc., a woolen mill with 14 sets of cards is found to cost in 
the United States $506,941 as against $339,854 in England, a higher 
cost in the United States, according to the board, of about 49 per cent. 

In the case of a worsted spinning mill the increased cost rises to 67 
per cent and in case of a worsted weaving mill to 43 per cent. The 
board admits that the machinery needed, when landed on the wharf 
in this country wiU cost from 60 to 65 per cent more than in England 
and that about 87 per cent of all machinery is imported. As the 
machinery represented about*one-third of the total cost of building 
and equipping the plant, this item alone accounts for much the greater 
part of the additional expense of a fully equipped plant. The tariff 
on machinery is thus allowed to figure as a fundamental proposition 
in the cost of carrpng on the industry; nor do we find any suggestion 
or estimate as to how much would be saved to the business if this 
entirely unnecessary element of expense should be eliminated. The 
fact that this element of cost, due to excessive outlays for fixed capital 



14 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

caused by high-tariff duties, is cumulative and runs throughout the 
estimates of the board can be reahzed by an examination of the 
tables in the report. Although there is no explicit statement that 
the cost of production is figured upon a basis which recognizes this 
outlay as permanent, it is plainly conveyed in the statement that 
the higher cost in the United States for machinery and buildings is 
a ''very important element" in the outlay called for. 

LABOR COSTS. 

Analyzing the problem of labor costs in the United States and 
elsewhere for the various products which are taken under considera- 
tion, accuracy can be secured only by investigations covering a 
considerable period of time. The board, however, has obtained either 
costs, taking them from the books of the mills, for comparatively 
short periods, or else estimated costs on samples. These methods 
of working imply that it has not been positively known whether the 
amount laid out for labor represents approximately a normal per- 
centage of total cost. Very large variations in the costs of different 
classes of products are found by the board. These are frankly ex- 
plained on the ground that in some cases the mills were running 
full time, while in others they were not. 

Where they were not running full time, the labor cost was neces- 
sarily a different percentage of the total than when the mills were 
running full time. In the latter case a larger sum of money was 
paid in wages and a larger number of units of product were manu- 
factured than in the former, yet practically the same sum in each 
instance was expended in overhead charges, rent, interest, fixed 
expenses, etc. Thus, the relation between overhead charges and 
labor cost was materially altered, and the percentage of labor cost 
to total output was necessarily made to appear different in the two 
cases. The board states that in order to meet this difficulty it 
adopted the plan of assuming that mills were running on full time 
with a normal total output. 

Such an assumption is not necessarily correct, and leads to serious 
errors which could be avoided only by securing costs over a normal 
period of actual production. In England, where the costs for tops, 
yarns, and cloths were obtained almost entirely by the sample method, 
it was, of course, impossible to know anything about the relation 
between the cost on a basis of full-time production and that on part- 
time production. On the assumption that mills were running on full 
time the tendency is to lessen the percentage of labor cost in the 
product, provided the figures extend over a period long enough to 
show the actual relationship between labor cost, capital, and mate- 
rial cost. That is to say, if costs were obtained from a mill running 
full time, other mills working only part time being disregarded, labor 
cost would undoubtedly be shown as a relatively smaller allowance 

Eer unit of output. Where, however, ct)sts are figured on the sample 
asis, the assumption that the mill ran more time than it actually 
did, necessarily implies the payment of a larger sum in wages than 
is actually the case, while outlays for fixed experses remain the same 
in the one instance as in the other. The abstract relationship 
between outlays for fixed capital and outlays for labor, on a basis of 
full-time production, therefore, tends to increase very materially the 
percentage going to labor. 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 15 

Thus assume, for example, that a given sample of cloth is pre- 
sented to a mill making it, and the mill is asked to furnish costs 
relating to the sample on the basis of a day's production. It may 
be assumed that the capital cost or fixed charges of the plant for 
a year are represented as 300, while labor costs are represented 
as 500, and raw material as 200, a total of 1,000 units of outlay. In 
this case labor outlay constitutes one-half of the cost of operating 
the plant over a specl^ed period. Noav, assume that these figures 
are obtained as result of experience, which shows that the mill is 
idle one-fifth of the time. If the miU ran full time, there would be a 
corresponding increase in outlay for raw material and labor, but 
not for capital costs. Now, if samples were used as a basis for cost 
analysis on a specified date, the relative proportions of labor, raw 
material, and capital costs would be different from those which 
would exist when a period of idleness was inyolved. The labor 
cost would assume a much larger proportion of the total expense 
than it would under the other circumstances. Throughout the 
board's figures there is an effort to give labor costs in some detail 
and to make it appear that the differences in labor cost between, say, 
England and the United States, are an important reason for differ- 
ences in cost of production. Thus figures are frequently submitted to 
show the importance of labor cost and the fact that labor is much 
more expensive per unit of product in this country than it is in 
England or the continent. 

RAW-WOOL SCHEDULE. 

In preparing the figures showing cost of raw wool the board 
has adopted the plan of ascertaining value of improvements and 
equipment, depreciation, losses, expense of operation, and receipts. 
Then the receipts are deducted from expenditures and the remain- 
ing balance is divided by the number of pounds of wool secured from 
the flock to which the expenditure applied, the result bein^ a figure 
designated as the net charge against wool per pound. This is then 
taken as the basis for estimating the competitive position of the 
woolgrower. It is evident that anything which would alter the 
allowance for expenditures or the receipts would materially alter 
the ultimate figure used as the net charge against wool. Tliis calls, 
therefore, for a careful analysis of the sources of income and expendi- 
ture with a view of ascertaining how far different elements are of 
importance in connection with the conclusions arrived at. Such an 
analysis shows that the chief items of receipts are those from wool, 
and ''from other sources." A comparison of the figures shows that 
in very many cases the receipts ''from other sources" are much larger 
than those from wool. Consequently, there is a much larger oppor- 
tunity in these instances for varying the income through changes in 
prices affecting other classes of products than changes affecting wool. 

For example, in Table 18 (p. 364), which gives the results of a study 
of about 30,000 pounds of wool in the Ohio region, the total receipts 
" from other sources " were $11 ,326, against receipts from wool of $6,859. 
This made a total of $18,185, of wliich more than 60 per cent came 
' ' from other sources." Thus it is clear that slight changes in the price 
of mutton, alterations in freight rates and the like, might fundamen- 
tally alter the net charge against wool at almost any time. In other 



16 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

words, the showing of net charge made by the board, however cor- 
rect it may have been at the time it was computed, is not correct 
for any otner date, and is subject to modification and alteration of 
an extensive character. 

INVESTMENT IN FLOCKS. 

Although the board gives the cost or net charge against wool with- 
out reference to the allowance for capital, or, as they express it, '' in- 
terest not included," the amount of capital invested per head is given 
in the^iorm of a series of estimates (pp. 315-325). These show wide 
variations in the amount of investment, and the rate of income on 
capital is figured upon the basis of the capital per head, as shown in 
the column which has that caption. It is clear that the conclusions 
to be drawn as to the percentage of remuneration now being received 
by the wool grower are based upon this statement as to the amount 
of capital invested. This explains why the returns of the board show, 
in many cases, so low a relative lack of income, or even a distinct 
loss which is presented as a minus quantity in the column headed 
''Rate of income," and which seems disproportionately great because 
of supposedly large investment. 

The question of the degree of correctness of the figures concerning 
the capital invested per head is, therefore, of considerable interest, 
if a fair conclusion as to the degree of profitableness of the industry 
is reached. The board states (p. 313) under the head of ''Income 
on investment/' that "the investment per head of sheep has been de- 
termined by dividing the total investment, exclusive of lands, by the 
size of the flock. The investment in land has been excluded because 
of its widely varying significance in different sections and even among 
flock owners of the same section." To this is added a statement that 
"in the western United States the prevailing rate of interest varies 
from 8 per cent to 10 per cent; in Australia from 4 per cent to 6 per 
cent, and in South America from 5 per cent to 6 per cent." This is an 
apparent effort to show that the cost of getting capital in the United 
States is higher than either in Australia or South America. 

An important feature of the discussion is the fact that the 
valuations assigned to the capital invested are, in many cases, neces- 
sarily estimates, based upon the worth of certain elements of capital, 
as valued from the standpoint of earning power. The large invest- 
ment of capital in the sheep industry is, therefore, more or less 
the result of estimate or imagination. It is dependent upon the 
return that could be realized by the use of the capital supposed 
to be employed there, if it were to be turned into some other channel. 
Very little attention need be given, therefore, to the question of the 
rate of return on capital invested in the sheep industry, particularly 
as the figures given by the board show a variation from losses of 25 
per cent to profits running as high as 35 and 40 per cent. 

ANALYSIS OF EXPENSES. 

The expense of raising wool is figured under different groupings 
already suggested, including miscellaneous costs and costs of labor, 
forage, shearing, and selhng. A study of the tables (p. 315-332) 
indicates that expenditures for labor were in many cases a very small 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 17 

percentage of the total outlay, while expenditures for forage, although 
sometimes greater than those for labor, were also a relatively small 
percentage. Thus, a summarization of Table III (p. 318) showed for 
807,775 sheep, yielding 5,459,088 pounds of wool, a labor cost of 
$494,498, a forage cost of $311,731, and a miscellaneous expense of 
$754,784, or a total expense of $1,561,013. This shows that about 
one-half of the expenditures figured in the raising of wool are not 
specified for the several flocks reported, but are grouped as miscella- 
neous. Such a condition is found generally throughout the tables of 
the report. That being the case, it is not possible to form an accurate 
idea of the methods employed in securing the results, since it is not 
practicable to determine how the miscellaneous expenses have been 
made up, or how far the items included are correctly computed in the 
various cases studied. The danger in the situation is seen when the 
board attempts to work out the net credit to or the net charge against 
a pound of wool. 

So wide a discrepancy would be obtained by changes in the forage 
figures, designed to adjust the cost to forage prices on the farm, and 
to market prices, that the board feels constrained to present two series 
of estimates, one showing the net charge against wool on the basis of 
the market price of grain and hay, and the other the net charge 
against wool when the grain and hay used have been taken at the 
average cost of production of such grain and hay. The theory in the 
first case is that, since the farmer could sell his grain and hay at the 
market price, he should be allowed such market price when he used 
them in his sheep-raising enterprises— a theory which was accepted 
by the board in connection with the wood pulp and paper inquiry. 
The other view is that the charge for grain and hay should be on the 
basis of average cost, inasmuch as the cost of raising sheep is a con- 
tinuous process, and the grain and hay produced on the farm are 
merely items in that process, and might or might not have been 
sold at the actual market price. 

The fact is that not all farmers either buy or raise the whole of 
the forage they need, but they buy some and raise some, so that the 
question of actual cost of these items in the production of sheep can 
not be correctly measured on either basis. Nor can it be correctly 
ascertained by averaging the two, since there is no basis for arriving 
at such an average. It must be concluded, therefore, that the fig- 
ures of the board leave the inquirer uninformed as to the proper 
basis of charge against wool for cost of production, since they do not 
establish any basis for figuring the actual cost of production in such 
a way as to bear analysis. This alone indicates that the presenta- 
tions made by the board can not be regarded with confidence. That 
the board has taken the net charge against wool as established on 
the basis of cost of production of grain and hay does not necessarily 
show that the cost of production has been underestimated, since it 
is not known how the cost of production of such grain and hay was 
established. So far as can be ascertained, the board throws no light 
upon the plan followed in computing this result. The onlv exolana- 
tion afforded on this point is as follows: 

The value of the harvested crops fed to the sheep has been estimated in two dif- 
ferent ways. * * * By the method commonly used by most farmers the sheep 

S. Kept. 840, pt 2, 62-2 2 



18 DUTlfeS 6N WOOL AND MANUFACTURES OF WOOL. 

are charged with the market value of the crops as representing the price which they 
would have brought the owner had he sold them and which he would have had to 
pay had he been obliged to buy them. Probably most of these flock owners, however, 
grow such harvested crops as they feed to their sheep, and since the allowance of the 
market price may involve either a profit or a loss on their production it is deemed 
fairer to use the actual cost of growing the hay and grain in order to eliminate inter- 
mediate profits or losses. By this method the sheep are charged only with the cost 
of raising these crops in the locahty concerned during the year under consideration. 
This was determined by an investigation by the Bureau of Statistics of the United 
States Department of Agriculture, and the figures so compiled are used in the sub- 
joined tabulations. 

Unfortunately it is not possible to judge of the accuracy of the 
statistics given by the board without knowing the method pursued 
in estimating the cost of production. No data are furnished in this 
connection. 

If, however, it be true that the board has obtained the correct 
cost of producing hay and grain, the profits in farming must be 
very large (if market prices are correctly stated). Computing the 
expense of wool production at the market price of hay and grain, 
37,734 pounds of wool given in Table 13 (p. 357) would average 58 
cents per pound, while computing it at the average cost of production 
of grain and hay, it was found to be 40 cents per pound. This would 
be a difference in the net charge of 45 per cent. If a shift from 
cost of production to market price, or vice versa, which affects 
expenses covering only one-fifth of the total outlay, could produce so 
great an alteration as this in the costs, a presumption of serious 
doubt is raised as to the accuracy of the figures. 

FAILURE TO SEPARATE WOOL COSTS. 

It has already been noted that the board has not definitely sep- 
arated wool costs from the other costs involved in sheep raising. 
This is frankly admitted by the board in connection with the figures 
supplied as to the net charge against wool. It is stated (p. 313) that 
'*we have considered wool as the chief product and the receipts 
from mutton are offset against costs." Again (p. 313), ^'The 
receipts from wool, minus the net charge against or plus the net 
credit to a pound of wool, constitute the net income of the 
business; and the percentage which this sum bears to the 
capital invested is the rate of income on the investment." It is 
clear from this that any cause which changes the selling price of 
mutton necessarily changes everything that has been stated with 
respect to the cost of wool, which is thus made dependent not upon 
actual money costs but upon the market prices realized for an en- 
tirely distinct commodity which is necessarily raised in connection 
with the wool, the cost of which is in question. The analysis made 
by the board in this connection implies two distinct features of the 
situation which should be considered in ascertaining the meaning of 
its figures. (1) The board's study shows that numerous changes are 
occurring in the United States in regard to the demand for mutton 
and the price received for it, and these indicate that sheep owners 
who are disposed to raise the mutton-type of sheep can convert their 
industry into a much more profitable undertaking than those who 
insist upon raising merino sheep. 



DUTIES ON WOOL AND MANUFACTUKES OF WOOL. 19 

This is indicated by the fact that the crossbred sheep, returns for 
which were studied in the Middle West and Southwest, were found to 
pay the cost of the support and management of the flock before any- 
thing had been reahzed from wool, so that the income from wool was 
clear gain to the farmer. There is nothing to suggest that the same 
type of sheep raising should not be introduced in Ohio with a 
consequent reduction in the cost of producing wool. (2) The changes, 
according to the board, which are taking place in the price of mutton 
in foreign countries will inevitably alter the conditions examined 
there, determining the costs of producing wool. As the board states 
(p. 343), ''the dechne in the profits of wool production has, how- 
ever, been accompanied by an increase in the demand for mut- 
ton, resulting from the fact that the production of pork and beef 
has not kept pace with the growth of population. And at the 
same time the development of refrigerating facilities has made 
it possible for the fiocfe owners of countries, which, like Australia 
and South America, are far from the centers of population, to market 
their mutton." Again the board states (p. 346), "in Australia the 
receipts from mutton constitute a much smaller proportion of the 
receipts from other sources. This is partly due to the fact that the 
great sheep runs of the interior are unfavorably situated as regards 
marketing but in a larger measure to the fact that these growers 
place greater emphasis on the production of wool than on that of 
mutton and run their flocks accordingly." 

Finally the board says that — 

Should the industry cease to expand, the receipts from other sources would be 
very seriously reduced and the loss could be repaired only by developing the mutton 
side of the industry, which would involve modifications of the flock and the finding 
of a market. 

It would appear, then, that in the United States there is a much 
better position for an increased income from the flock through sales 
of mutton than there is in Australia, and what is true of Australia is 
also true of South America. A western farmer in the United States 
is advantageously placed for sending his sheep to market, and for 
raising the mutton type of sheep, at least in certain portions of the 
wool region. The Australian producer of the interior is not only 
not very well situated for the purpose of getting his mutton to 
market, but he also has to bear the heavier expense of refrigeration. 
In addition, the mutton of the United States is protected by sub- 
stantial tariff duties, against which the foreign grower, if he wishes 
to sell in the United States, must compete. 

The inference is apparent that from the increase in prices paid for 
mutton, the sheep industry of the United States will tend in the 
future to rely more and more on this element of income, and less and 
less on that which comes from the sale of wool. 

It is worth while to note that in the western, or "Territory" wool re- 
gion, the States which show a very high cost of production or net charge 
against wool, are those in which the mutton type of sheep has been rela- 
tively Uttle developed. The board's figures indicating cost of produc- 
tion or net charge against wool (p. 331), show that the highest costs 
in the Territory I'egion are those in Idaho, Wyoming, and Montana. 
The board's analysis of the composition of the flock (p. 348) shows 
that in Wyoming among the rams of the flocks, 63 per cent were 
of the merino type and 37 per cent of the mutton type, while among 



20 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

the ewes, 90 per cent were of the merino type and 10 per cent of 
the mutton type. In Montana, 42 per cent of the rams were of the 
merino type and 58 per cent of the mutton type, while 55 per cent of 
cwcs were of the merino type and 45 per cent of the mutton type. 
The lowest cost of production reported by the board in this region 
was that for the State of Washington, whe-re the wool was practi- 
cally clear gain. In that State 82 per cent of the rams were of 
the mutton type and 18 per cent of the merino, while aU of the ewes 
were of the merino type. As stated by the board: 

The importance of the merino blood in the three great wool-producing States of 
Australia is indicated by the following percentages: 

In New South Wales about 85 per cent of the rams and 90 per cent of the ewes are 
pure merinos. Of the remaining sheep, while some are pure-bred sheep of the mutton 
type, by far the larger part are crossbred with a merino foundation. In Victoria, which 
is the chief mutton-producing district of Australia, 84 per cent of all the sheep are 
either pure merinos or crossbreds with a merino foundation, and in Queensland 96 per 
cent of the sheep are pure merinos. 

Summing up, the board finds it impossible to separate costs of wool 
from costs of mutton, so that no positive conclusions can be drawn 
with reference to the future development of costs, unless both are 
considered in their relation to each other. Considered in that 
way, the net charge against wool in the future, if figured on the 
same basis as employed by the board, will be largely influenced by 
the showing made regarding mutton, consequently, it is reasonable 
to expect an increase in advantage for the western IJ nited States over 
the more distant countries, from which the exportation of fresh meat 
is more costly and difficult. 

CRITICISM OF TOP STUDY. 

The data for cost of tops were obtained by the board through the 
use of a form, ''Schedule 2, Top making," the appropriate part of 
which is found on nages 631-632. On this form returns were sought 
regarding raw wool and other stock used, etc., price per pound, total 
cost of stock, and cost per pound of tops. Credit for noils and 
wastes is then given, and a provision is made for a net total. 
In the second part of the schedule space is given for data on 
sorting, blending, scouring, carding, combing, dyeing, and general 
expense. This gives the total conversion cost, and added to the 
cost of stock gives total manufacturing cost. Pounds of material 
entering into each process, productive or direct labor used, nonpro- 
ductive or indirect labor used, department materials used, total cost, 
and cost per pound of tops are shown for the items in the second part 
of the schedule. In assembling the data from the various schedules 
the board finds the first difficulty in that the data it obtains are not 
comparable. It notes that the term ''top maker" may be used in 
two ways, the one applying it to a merchant who purchases raw wool 
and sells tops to worsted spinners. He may have a plant of his own 
for combing the wool or have the combing done on commission. 

The second definition regards the top maker as a manufacturer who 
makes tops as an intermediate process in the manufacture of yarns 
and woolens. The difference in the two instances is that in one 
there may be a profit for an independent operatoi , while in the other 
there may be a loss. Another element of difficulty in the compaiison 
is that "in foreign countries wool combing is done very largely on 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 21 

commission, and there are great establishments whose sole business 
is the turning of the wool for their customers into tops and noils for 
a given fixed charge." This is done only to a limited extent in this 
count! y, the more geneial practice being to make the tops in 
the woolen mill itself (p. 640). Admitting the attending dijficulties, 
the board says that ''there are certain costs which inhere in the 
one method and not in the other" (p. 640), while ''the commission 
rate for combing would under normal conditions cover not only 
interest on the plant, but whatever profit the comber is able to 
make besides" (p. 640). Moreover, the board has found difficulty 
due to the fact that the cost of manufacture differs materially with 
the character of the wool. Finer wools require more careful treat- 
ment in scouring and also a slower speed of the machinery, thereby 
reducing the output and increasing the cost per unit. It is, therefore, 
as the board admits, "difficult to tabulate figures giving an average 
which can be taken as representative, since the variation in the 
qualities of tops made is so great." 

A third difficulty is found in the fact that the proportion of tops and 
noils secured from the process differs considerably per pound of tops. 
Charges for commission combing in England differentiate the charges 
according to these relative percentages, the charge increasing as the 
proportion of noils increases. Again, difficulty is found in getting at 
costs as a result of the difference in output. In one mill the average 
cost for all tops (covering a six-month period) was 4.28 cents per pound, 
while for another six -month period in the same mill the average cost 
was 9.37 cents per pound. This difference was due to the fact that 
during the first period the output was three and one-half times 
greater than in the latter period, when a part of the machinery was 
idle and the fixed and overhead charges continued the same. The 
board has therefore attempted to estimate the costs so far as possible 
on a basis of running full tune; but this must be erroneous in many in- 
stances, particularly so when the attempt is made to institute compari- 
sons between conditions in different countries. Although the board 
presents (p. 642) a series of actual returns showing the cost of pro- 
ducing tops in this country during successive periods at given mills, 
it does not apparently accept this statement as representative or final. 
On the contrary, it states that in taking the actual figures on a large 
output it is impossible to separate labor costs according to the exact 
quality of the tops (p. 642). 

On page 643 is given a table showing the cost of making a very 
fine quality of tops, and on page 644 is given the cost of combing in a 
continental plant running on fine Australian merinos and South 
American crossbreds. Apparently, then, the returns in this plant 
should have been comparable With those in the American plant or 
plants represented on page 643. In the latter table the cost of con- 
verting cnoicest Australian wool into tops was $0.0732 per pound, 
while in the continental plant the highest cost of combing was 
set down as $0.04459. In spite of this relationship the general 
conclusion is reached that "the cost of making tops in the United 
States is about 80 per cent greater than abroad," notwithstanding that 
the bulk of the tops discussed by the board are of the finer quality 
which cost only 55 to 65 per cent less to produce in England than here, 
the lower grades of tops being entirely excluded under the present 
prohibitive tariff, so that no basis of comparison can he ob- 
tained. The general criticism upon the top study, therefore, must 



22 



DUTIES ON WOOL AND MANUFACTUEES OF WOOL. 



be (1) its lack of reduction to a comparable basis; (2) its fail- 
ure to get standard costs on standard qualities in the United States, 
or to show the cost of converting an actual sample of Australian 
wool, or other wool, into tops in England and in the United States. 
The figures on tops are, in a very high degree, variable and conjectural, 
being at best little more than an approximation to the facts, and 
practically admitted to be such by the board. 

The fact that in not a few instances a variation of as much as 100 
per cent in the production costs is noted, not only for a definite 
article in a definite place but at two different periods of time, should 
make it impossible to accept any of the figures given by the board 
for cost of production of tops as at all definite or final. There is 
consequently no statement about the cost of making tops that can 
not be paralleled by another statement from the report in support 
of an entirely different cost and entirely different conditions of doing 
the work. 



INCONSISTENCY BETWEEN COSTS AND PRICES OF TOPS. 

In addition to the statistical difficulties which arise because of 
the top costs furnished by the board, ground is afforded for doubt 
regarding the cost figures by observing quotations of prices given 
by the board in Volume I (p. 106). The board states that 'Hhere 
are no regular quotations of top prices in the United States " 
(p. 105); and then gives English quotations (p. 106). These quo- 
tations presumably afford a basis for figuring corresponding values 
in the United States with due allowance for duty. The quotations 
given for tops of specified quality are shown in the following table: 

Table 1. — Quotations in England for tops. 
[From the report of the Bradford Chamber of Commerce, pubhshed by Tariff Board, p. 106.] 



Quality. 



Thirty-twos . . 
Thirty-sixes.. 

Forties 

Forty-sixes . . . 

Fifties 

Fifty-sixes . . . 
Fifty-eights . . 
Sixties, super. 
Sixty-fours . . . 

Seventies 

Eighties 



1908 



Cents per 
pound. 
14. 7-24. 8 
15. 2-25. 9 
16. 2-26. 9 
19. 3-28. 9 
28. 4-34. 
34. 5-46. 6 



41.6-51.7 
43. 6-54. 2 
47.7-55.8 
54.- 8-60. 8 



1909 



Cents per 
pound. 
20. 8-25. 4 
21. 8-26. 4 
23. 8-28. 4 
26. 9-33. 
33. 0-41. 6 
.38. 0-47. 7 
44. 6-52. 7 
46. 6-56. 8 
49. 2-57. 8 
50. 7-58. 8 
58. 8-63. 9 



1910 



Cents per 
pound. 
24. 8-27. 9 
25. 9-28. 9 
28. 4-30. 9 
33.5-35.0 
39. 5-43. 6 
46. 6-49. 7 
50. 2-54. 8 
53. 7-58. 3 
54. 8-59. 8 
67. 8-62. 9 
60. 8-64. 9 



1911 1 
(January- 
November), 



Cents per 
pound. 
24. 8-27. 4 
25. 4-28. 4 
25. 4-29. 4 
28. 4-32. 4 
33. 5-38. 5 
39. 5-44. 6 
42. 6-48. 7 
49. 7-54. 2 
50. 7-55. 8 
51.7-57.8 
56.8-61.8 



i Quotations for 1911 from the Wool Record. In each case they are for "colonial tops." Thirty-twos, 
thirty-sixes, forties, and forty-sixes were "prepared" tops. 

From this it is seen that the cost of number 32's runs as low as 25 cents 
per pound, the designation of the tops as ''32's, 40's, etc.," indicating 
the count of yarn to which it would spiQ if worked up. While 
the board observes that ''No hard and fast table of equiva- 
lents can be made of the English and American terminology for top 
(and yarn) qualities," it says that 64's to 70's may be taken as the 
equivalentof fine tops in the United States. In 1911 the prices for these 
qualities, as given above, ranged from 50.7 cents to 57.8 cents at 



DUTIES ON WOOL AND MANUFACTURES OP WOOL. 23 

Bradford, and with free wool it might be assumed that the cost in the 
United States would be the same plus the difference in cost of pro- 
duction between the two countries. This, however, would not appear 
to be the case, as shown by a study of prices of raw wool and cost 
of making tops, as furnished by the board. 

It would seem that the prices in England are considerably higher 
than indicated by the board's study of wool and tops. If, for 
example, it be assumed that scoured wool is worth 50 cents a pound, 
it would appear that the cost in England must be at least 54 cents 
for this grade, and could faU below that only through declines in the 
price of raw wool sufficient to make up for the difference. Inasmuch 
as the figures given by the board vary considerably from this price 
level, the duty required on tops of a given grade can not be con- 
sidered at all stable or fixed, since the percentage relation is likely to 
be thrown out of adjustment by changes in the value of wool. More- 
over, there is no exact table of equivalents between English and 
American top and yarn qualities. Hence the comparative cost figures 
given by the board for tops can in themselves be only approximate. 
As the board says (p. 106), ''Wool varies so widely in quality, both 
with the locality where produced and with the breed and condition 
of the sheep on which grown, that any comparisons of qualities must 
be approximations." As a matter of fact, the quotations given in 
Table 1 for such yarns as 32's at Bradford are so low as to be far 
below the average price of raw wool in the United States, independent 
of the cost of manufacture into tops. Yet the board furnishes data 
on the relative cost of production of No. 32 yarns from tops, apparently 
assuming that there is a competitive basis upon which comparisons 
may be made between the two countries. 

STATISTICAL CRITICISM OF YARN MANUFACTURE. 

The Tariff Board notes that the investigation into the cost of 
worsted yarns involves the securing of the actual book figures from 
mills for a given period of time showing the total quantity of yarn 
produced, the variety of counts, the average count, and the total 
expenditures for the same period. These expenditures were analyzed 
in order to put the different mills on a comparative basis as to over- 
head charges. The board also obtained the use of tables employed 
by worsted spinners relating to the cost of making different counts 
of yarn, and finally estimates were secured on the cost of making 
certain qualities of yarn. There seems to be no reason for doubting 
the responsibilty of these figures under the conditions that are 
described. The board, however, admits that it is beyond possi- 
bility to get figures on a uniform basis. It says that /'a mill running 
fuU time or overtime can produce much more cheaply than a mill 
running half time, * * * g^ j^ijj making worsted yarns in the gray 
is able to work more cheaply than when yarn is made from dyed 
tops." In order to overcome the first of these difficulties, the board 
assumes that all costs are to be figured on the basis of full normal 
output. 

This gives a basis of comparison which does not overcome the 
difficulty that figures vary widely for other reasons, notable among 
which is the fact that mills do not work on the same Qualities 
of tops and yarn. The adoption of full normal output as a oasis of 
comparison, therefore, does not help materially, since no allowance 



24 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



is made for variations in the proportions of different classes of yarn 
manufactured. The board admits this, stating (p. 646) that ''varia- 
tions are found to appear not only according to variations in actual 
output due to general business fluctuations, but also according as a 
mill is producing just those yarns for which it is especially equipped." 
If the market demand of the moment requires the production of either 
higher or lower counts, the costs on these will be correspondingly 
increased. Moreover, the fact that the cost of making a given count 
of yarn varies with the quality of wool from which it is made, and with 
the weight of the roving, renders the matter of comparison difficult. 
All these points are fully acknowledged by the board (pp. 646, 647) as 
inj uring the comparative basis of its computations. There is no reason 
to believe that tlie figures obtained by the board, or the figures that 
could be obtained by any similar organization, would show conditions 
on a comparable basis, either between mills in different parts of the 
United States or between mills here and mills abroad. They must 
be taken as being simply representative of costs under the particular 
conditions that happen to prevail at the time when the board made 
its investigation. Furthermore, it was not possible for the board 
to obtain comparable figures in England, for the reason that the 
interest charge was included in the English figures, but not in- 
cluded in the American. An allowance was subsequently made 
for this difference, but it does not appear to have been sufficient to 
cover the whole variation in the basis of the estimate. 

INCOMPLETE YARN COSTS. 

The inquiry was not sufficiently extensive from the statistical point 
of view to furnish an adequate analysis of the cost of producing 
different yarns. On page 648 are given figures for costs in ten differ- 
ent kinds of two-ply yarns 28's, 32^s, 36's, 38's, 40's, 42's, 44's, 46's, 
48's, and 60's. None of the coarser or of the finer yarns are given. 
When figures for England are given, they are not obtained on a com- 
parable basis, but relate only to two-ply 24's, 28's, 32's, 36's, 40's, and 
50^s, as shown in the following table: 

Table 2. — Comparative conversion cost ofmahing certain counts of worsted yarn from tops. 

[Tariff Board Report, p. 650.] 



Ply and count of yam. 



United 
States. 



Excluding 

interest. 

(Cost per 

pound of 

yarn.) 



England. 



Including 
interest. 
(Cost per 
pound of 
yam.) 



For com- 
mission 
work, in- 
cluding 
interest and 
profit. 
(Cost per 
pound of 
yarn.) 



2/24 
2/23, 
2/32, 
2/36 
2/40 
2/50 



Cents. 
10.86 
12.62 
14.48 
16.61 
17.99 
24.67 



Cents. 
5.6 
6.6 
8.1 
9.6 
10.6 
13.7 



Cents. 



6.6 

7.6 

9.1 

10.1 

12.2 

15.2 



DUTIES ON WOOL AND MANUFACTURES OF WOOJ>. 25 

It should be noted that in this table the costs of conversion per 
pound of yarn of certain grades enumerated are in one or two in- 
stances quoted at cost rates, which are not the same as those com- 
puted in the detail table on page 648. The figures in Table 2 appear 
to show a cost in the United States which is almost double that in 
England, notwithstanding that interest was included in the English 
costs and not in those of the United States. There is no statement 
as to whether the comparison is based upon mills which are running 
full time in both countries, nor is there any specification as to the 
character of the wool used in each case. The figures given, therefore, 
for the cost of converting tops into yarn are largely not comparable, 
as admitted by the board, and are so, not only from the standpoint 
of quality of yarn used, but apparently also from the standpomt of 
conditions of production, full time or part time operation, and others. 
In the few cases where material is given for the manufacture of yarn 
of one single count from different grades of wool, no comparative 
figures are furnished to show English and other foreign costs. 

Thus on page 647 is given a table intended to illustrate variations 
due to changes in the quality of the material and the twist per inch. 
In those cases where a single quality of yarn — two-ply 30's — was 
being produced from half-blood wool, it appears that the total 
expense per pound was about 0.099 cent, while in making the same 
ply and count from quarter-blood wool, the cost was about 0.114 
cent per pound. In the first case the yarn was No. 13, and in the 
latter case it was No. 14. Thus was indicated a difference of 0.015 
cent, or about 13 per cent of the higher cost involved in making 
the yarn from quarter-blood wool. It is clear that a variation of 13 
per cent in the cost of making yarns, according to the wool from which 
they were spun, is one that should be allowed for in figuring the differ- 
ences in cost between the United States and England in the later 
tables prepared for that purpose. Nothing of the sort has been done 
there, however, but the assumption throughout these tables is that 
in each case the manufacturing operation has been carried on with the 
same class of wool or tops as was employed in the competing country. 
This failure to put the two countries upon a comparative basis would 
alone be sufficient to impair very seriously the basis of estimate. 

There is further reason to question the validity of the figures 
obtained in England because the data there secured were obtained on 
a basis of samples. As the board says (p. 650) ''figures of cost were se- 
cured in England from various manufacturers on actual samples." 
After they had thus been obtained on the basis of samples (of yarns) 
the returns were averaged, and the figures given ''represent the average 
of these various calculations." As seen in the United States study, 
average figures of this kind, even when based upon full data for the 
mills to which they relate, are necessarily unsatisfactory, because 
they do not show, and probably can not be made to show, the cost 
of production carried on under similar conditions. Still less could 
there be this degree of comparability when the figures were made up 
from samples, as the furnishing of cost data on such a basis would be 
largely conjectural, nor could it be known how far English manu- 
facturers were reckoning upon the same fullness of operation, uni- 
formity of processes, and general similarity of conditions, found by 
the board in its American study to be essential to any accurate in- 
vestigation of the cost figures for comparative use. 



26 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



It does not seem, therefore, that the yarn figures furnished by the 
board are likely to be necessarily representative of the actual manu- 
facturing conditions in American mills for any very considerable 
production, or for any very considerable period of time. When it 
is considered that there was still less uniformity and inclusiveness of 
information in the English inquiry, the conclusion must be drawn 
that the analysis, particularly in its comparative features with refer- 
ence to yarn costs, has been quite unsatisfactory. 



INCONSISTENCY BETWEEN YARN COSTS AND PRICES. 

In Volume I of the board's report is given the following table in 
which is presented quotations in England for worsted and hair yarns : 

Table 3. — Quotations in England for worsted and hair yams. 
[From report of Bradford Chamber of Commerce and the Wool Record, published by Tariff Board, p. 114.] 



Quality. 



Worsteds: 

Two-thirty-twos, worsted 

Two-forties, worsted 

Thirties, super luster 

Thirties, super demi 

Thirty-sixes, super demi 

Thirty-sixes, demi 

Single sixties, botany 

Two-forties, botany white 

Two-forty-eights, botany 

Two-sixties, botany white 

Mohairs and alpacas: 

Two-thirty-twos, mohair plush 

Two-thirty-twos, mohair low quality. 

Two-forties, mohair medium 

Single twenty-eights, alpaca 

Single twenty-eights, alpaca low 



1908 



Cts.per lb. 
27.4-38.5 
32. 4-44. 6 
38.0-48.2 
25. 4-40. 6 



33.5-47.2 
60.8-73.5 



61. 8-75. 



1909 



Cts. per lb. 
31.9-38.5 
38. 5-47. 7 
38. 0-43. 1 
31.7-41.8 
37.3-47.2 



64.6-74.8 
65.9-75.0 



1910 



Cts. per lb. 
39.5-43.6 
48. 7-52. 7 
43.1-45.1 
41.8-44.4 
47.2-50.2 



73. 5-83. 7 



71.0-77.1 
75. 0-81. 1 

66.9-67.9 
56. 8-58. 8 
83.1-85.2 
56. 8-59. 2 
48. 5-49. 7 



1911 
(January- 
November). 



Cts. per lb. 
37. 0-43. 6 
45.6-52.7 
44. 4-46. 9 
39. 9-45. 



47.9-51.2 
71.0-76.1 



69. 0-76. 1 
77. 1-82. 1 

63. 9-66. 9 
56.8-58.8 
86.2-87.2 
52.1-58.6 
43.8-48.5 



This shows that worsted yarns, 2/32's, were in January, 1911, quoted 
at from 37 to 43.6 cents per pound, or an average of about 40 cents per 
pound. On page 648 (Vol. Ill) of the board's report the cost of con- 
verting tops into 2/32's is given as 14.48 cents per pound. As the report 
states on page 650, that the costs of turning tops into yarn is about twice 
in the United States what it is in England, the cost of making this kind 
of yarn in England should have been about 7.24 cents. This would 
make the cost of the yarn material, on a basis of 40 cents per pound, 
32.76 cents per pound. This would be far below the average scoured- 
wool price of Australian wool or fine wool of any kind. The board's 
data are admittedly given with reference to medium and high me- 
dium grades, employed in the making of cloths. The yarns from 
2/28's to 2/60's cited on page 648 are given as '^ medium and high me- 
dium worsted yarns," and on page 113 it is stated that ''30's to 40's 
are comparative!;^ coarse yarns, while 40's to 56's are medium." 

The difference in the price quotations as compared with figures for 
cost and the apparent discrepancies in nomenclature raise doubts 
as to the accuracy of the board's figures on one or both of these 
sets of returns. It appears, therefore, that the figures furnished by 
the board for yarns are not substantiated by the yarn prices cited 
in the first volume of the report. Thus, for example, on page 648 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



27 



the cost of converting 2/60's from tops into yarn is given as about 
32 cents, while the mean quotation of tnese yarns in England averaged 
about 80 cents in 1911. Deducting 16 cents, the cost of conver- 
sion in England, as .ndicated by the board, there would be left 64 cents 
as the cost of the tops actually entering into a pound of yarn. This 
cost would apply to considerably more than a pound of tops, because of 
the waste which has already been noted. Yet the quotation for tops 
given as ^'60's, super," is stated on page 106 as ranging from 49.7 to 
54.2 cents, the mean being about 52 cents — 12 cents less than the cost 
of the tops entering into a pound of yarn. If the board is right in say- 
ing the shrinkage in converting tops into yarn amounts to 4.5 per cent 
(credit being allowed for wastes recovered), the shrinkage on a pound of 
tops for conversion into No. 60 yarn would not be more than 3 cents at 
most, in which case the tops plus cost of shrinkage would be 55 cents, 
instead of 64, the figure obtained by taking the quotations for yarns 
and subtracting conversion costs in order to work out the material value 
entering into the product. It might be assumed that, whereas the 
board's figure for conversion is a cost figure, the prices taken from Eng- 
lish quotations are selling rates in the market, and can not be exactly 
compared. This objection has little validity, because of the fact that 
the analysis just made is based on prices for yarns and prices for tops, 
and the allowance for profit must be about the same in both cases, 
so that the difference may be estimated on the basis of approximately 
the difference in cost. 

Table 4. — Yarn quotations and conversion cost for worsted yam. 
[Cents per pound TarifE Board Report, pp. 114, 648, and 650.] 



Two-ply worsted yarn (count). 



Mean quotations at 

Bradford, Janu- 
ary-November, 1911. 



Tops. 



Yarn. 



Differ- 
ence be- 
tween 
tops and 
yarn 



Conversion. 



United 
States. 



England. 



Thirty-twos. 

Forties 

Forty-eights. 
Sixties 



26.1 
27.4 



52.0 



40.3 
49.2 
72.6 
79.6 



14.2 
21.8 



27.6 



14.48 
17.98 
23.35 
31.81 



7.24 

8.99 

11.68 

15.91 



In Table 4 is given a column showing the quotation furnished by 
the board for yarns of various counts from 32's to 60's. From 
this is deduced a column of differences showing the amount that 
was added to a pound of tops of a given description by converting 
it into yarn. It is seen that in case of 32's, the average price was 
26.1 cents for the tops, while for the yarn it was 40.3 cents. This 
seems to indicate a difference of 14.2 cents as the approximate 
cost of converting the tops into yarn. In Table 2, which is taken 
from the board's report (p. 650), the cost of converting tops into 
yarn is given as 8. 1 cents, or for commission work, 9.1 cents, as 
against the 14.2 cents, deduced from the actual quotations. It is 
interesting to observe that the cost figure for the United States on 
this same yarn (Table 2) was 14.48 cents per pound, or not far from 
the cost in England, indicated by the difference of comparative prices. 
It might be assumed here again that the board's cost figures are for 
cost and not for price, but that objection does riot apply to the 



28 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

charge for commission work, which in this case is given as 9.1 cents 
per pound, while moreover all of the English figures are given ''in- 
cluding interest," so that they ought to correspond with the highest 
market charge for yarns of that particular ply and count. On the 
whole, therefore, it would seem to be an inevitable conclusion that the 
figures furnished by the board for yarn prices do not correspond to or 
substantiate those which it has furnished for yarn cost. 

CRITICISM OF CLOTH DATA. 

The criticisms made with reference to yarns and tops become much 
more serious when attention is directed to the cloth-manufacturing 
analysis of the board. The board not only concedes the impossibility 
of securing data as to the comparative costs by processes of making 
fabrics, but also the extreme difficulty of getting comparative figures 
even on fabrics. This is because (p. 627) ''there are no absolute 
standards in the cloth trade, and each mill turns out a great variety 
of different fabrics." Moreover, it was not possible to get mills 
abroad to give costs on the same basis as in the United States, 
because they do not keep their books upon the same plan. It is 
found, therefore, that the board almost wholly dismisses the cost 
method of analysis when it comes to fabric costs. Instead it sub- 
mits samples of given fabrics to the mills and permits them to give 
estimates on the cost of making these fabrics, based upon experience 
with similar operations, but largely conjectural, because in many 
instances, probably in the majority, the mills had never devoted 
themselves to manufacturing the particular kind of cloth on which 
they were asked to furnish cost estimates. As special reasons for dis- 
trusting the figures supplied through this sample inquiry, therefore, 
may be mentioned the following: 

1. The question of uniformity and amount of output is fully as 
important in connection with the manufacture of cloth as in yarns 
and tops, yet the method pursued makes no allowance whatever for 
such differences and necessarily could not do so subject to the condi- 
tions under which the inquiry was conducted. 

2. There is no indication as to the origin of the wool used in the 
various fabrics and whether it was imported into the United States 
or whether it was the product of domestic sheep and was worked up 
at prevailing prices without the payment of duty. 

3. There could be no ascertainment of the extent of profits allowed 
to intervening factors; as, for example, the granting of profits on 
tops, yarns, etc., to persons who supplied these intermediate prod- 
ucts to the mills that made the cloth, as compared with the condi- 
tions prevailing in plants which made their own tops, yarns, etc., 
and then used them in cloth manufacture. 

4. In many cases it was found that different methods of production 
were followed in the United States and abroad, the goods being dif- 
ferently dyed in the countries compared and a different number of 
looms operated in some instances in foreign countries, as compared 
with the number operated by the employee in American mills. 

These factors alone would render the data obtained untrustworthy, 
because they would indicate that it was impossible to obtain fig- 
ures upon a distinctly comparable basis. In the absence of such 
a comparative basis, about all that could be said for the figures as 
to cloth costs at the best would be that they represented probable 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 29 

costs of making the cloths under varying conditions in American and 
European mills, these varying conditions including differences in 
character of machinery and speed thereof; amount of work done in 
the mills as compared with total capacity; character of raw material 
used ; and source from which intermediate products, such as tops, yarns, 
and the like, were obtained. Even if, therefore, it should be admitted 
that the board's figures for tops and yarns obtained by the method of 
aggregate returns were trustworthy, it could not be admitted that the 
figures for cloths were similarly trustworthy, and least of all could 
it be conceded that these figures were in position to be compared 
with those of the earlier products obtained by the other method 
referred to. This produces a separation between that part of the 
board's report which has to do with the earlier products and that 
part of the report which deals with cloth. There is no foundation, 
either actual or professed, for considering the figures given as furnish- 
ing a complete analysis from tops up to cloth, because of the entire 
change of method employed in the study of cloth costs. 

EXTENT OF COST INQUIRY IN WOOLENS. 

One of the principal questions to be considered in connection with 
the manufacturing investigation of the board is the extent and 
reliabihty of the inquiry. The board opens its statement with 
the assertion that ''in the course of the wool and worsted inquiry, 
agents of the board visited 188 different mills" and that of these 
174 furnished verified information. These mills are considered to 
be ''representative of the industry in this country," because they 
include practically two-thirds of its productive capacity and employ 
64 per cent of the total number of persons engaged in the business. 

The assertion that an inclusive inquiry has been made should be 
subjected to very careful scrutiny. In spite of the large number 
of mills visited, the board concedes its inability to secure general re- 
turns with respect to cloth. It notes that there is no possibility of 
discussing the cost of cloth in general because of the great variety 
of different fabrics, which renders such an investigation in general 
terms absurd. It then takes up (p. 626) the question whether or 
not results could be obtained by a study of processes, but it finds 
that this is practicable only with a certain few. 

A statement of costs obtained by this method, says the board, 
"would be utterly meaningless " as applied to cloth, and "the same 
is true of worsted yarns." Only by a process of prorating various 
charges can anything satisfactory be obtained in yarn. In regard to 
cloths, even this method was found to be impossible, and therefore 
the board was driven to the ascertainment of costs of cloths by 
submitting samples to manufacturers and obtaining from them 
cost statements relating to these particular samples. It is evi- 
dent that this sample method is entirely different in principle 
from any of the methods suggested by the board for the ascer- 
tainment of costs in the more elementary processes of top and 
yarn making, and others related thereto. What the board has 
to say about the cost of manufacturing wool into products of 
various kinds may, therefore, be discussed under two heads — 
the one the reliability of the sample method of analysis, the 
other the satisfactory or unsatisfactory character of the study made 
of the more elementary processes. 



30 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

STUDY OF SAMPLES. 

Turning attention first to the question of samples, it is found that 
the board divides its sample analysis into two different groups of 
results. The first deals with American and foreign costs on fabrics 
made in the United States; the second deals with foreign-made goods 
of the kind imported. In the first groups analysis is made of 55 
different items, data as to each of which were obtained from Ameri- 
can and English mills, while in some cases further information was 
had as to French and German mills. In the second group 14 samples 
are analyzed for costs. 

It is clear that in this analysis the factors to be taken into ac- 
count are (1) how many mills were consulted with reference to the 
cost of these samples; (2) how representative were these mills? On 
these points the board throws no light whatever. It states that, 
after a schedule had been prepared for the analysis of costs, ''our 
agents then visited the mills with specific samples and worked out 
with the proper officials the cost under each separate process. In 
practically all cases they were given complete access to the books 
in order to see by what method particular charges were made and 
to satisfy themselves that the estimated costs entered were based on 
the actual costs at the miU. By this detailed analysis by processes 
the estimates came as near to the actual costs as the mill itself was 
able to make them." In getting the foreign cost " the method adopted 
* * * was similar to that used in this country." 

The citations make it evident that the sample study was not a 
study of actual costs at all. It was a collection of estimates as 
to the cost of making cloth at various mills, many of which had 
never made the cloths in question. In getting foreign costs it 
was possible only to obtain the same conjectural material. The 
report states (p. 630) "samples of identical fabrics cut from the 
same piece were taken to England and to the Continent. These 
were shown to a number of manufacturers and their estimates on 
the cost of production secured." They were then tested by being 
submitted to a cloth manufacturer, who checked them from his own 
experience. The only light thrown by the board on the character 
of the mills consulted abroad is the statement that they were 
''mills of high efficiency" (p. 630). So far as can be ascertained, the 
board does not state whether the mills consulted in the United 
States were or were not mills of similar high efficiency as compared 
with other American mills. This makes it obvious that the board 
did not in any case obtain figures for actual costs from a consider- 
able number of manufacturers in its sample investigation; that it 
did not obtain comparative figures, even in the mills which were con- 
sulted, for cloth of kinds which they were in the habit of producing; 
that it did not obtain figures abroad in this part of the investigation, 
on fabrics made abroad, but only theoretical estimates on cloth 
produced in the United States; that it does not make clear in its 
report whether the foreign figures and American figures were pro- 
duced from mills of similar relative degrees of efficiency or not. 
There is no reason to suppose, therefore, that anything was ob- 
tained in this investigation which might not have been obtained in 
a quite different form and with figures leading to a very different con- 
clusion had mills been consulted, and different fabrics and more exact 



DITTIES ON WOOL AND MANUFACTURES OF WOOL. 31 

modes of comparison been employed. The sample investigation can 
not, therefore, be regarded as throwing any general light upon costs, 
since obviously the system itself is based upon no general data. 

AD VALOREM OR SPECIFIC DUTIES. 

Much attention has been given by the Tariff Board to the method 
of levying duties. 

The board admits the unfortunate effects of the present specific 
rates on raw wool, and notes that ''various wools of heavy shrinkage 
can not be profitably imported into the United States," while it also 
comments (p. 381) on "the practice abroad of preparing and selecting 
the light-shrinkage sorts that are peculiarly suitable for the American 
trade." After describing the proposed ad valorem rate, the gradu- 
ated specific duty on the scoured content, etc., it finally decides 
against the ad valorem plan and in favor of the specific rate on the 
scoured pound. With reference to the ad valorem mode of levying 
duties, it states that "the economic objection to an ad valorem duty 
on wool arises from the fact that the amount of duty paid, since it 
fluctuates with the foreign value of the commodity, would not be 
adjusted to the needs of the Government, of the consumer, nor of the 
American wool grower. A speculative change in the market which 
increased the price of wool would automatically lead to an increase in 
the amount of duty at the very time that the manufacturer is most 
hampered by the existing high price, when the consumer most needs 
relief, and the wool grower is most prosperous." 

That the real question in the mind of the board does not, however, 
relate to the consumer can be seen from the latter remark that "if 
the basic idea of the duty on wools is to give the domestic grower 
permanent protection it should remain as uniformly effective as pos- 
sible under all changes of foreign conditions (shortage, overproduc- 
tion, etc.). Ad valorem duties would not accomplish this * * *." 
It is the supposed inabihty of the ad valorem duties to give what the 
board calls "permanent protection" that condemns them in its sight. 
As for the remedy suggested by the board — the levying of duties on 
the scoured wool content — the contention that "some method of 
assessing a specific rate on the clean content would remedy most of 
the primary faults of Schedule K" (p. 398) is answered by Edward 
Moir, president of the Crown Mills, Marcellus, N. Y., in a recent letter to 
the Daily Trade Record, as follows : 

The board states that ad valorem rates are open to grave difficulties from the admin- 
istrative and revenue point of view in the case of a crude and bulky commodity like 
wool. 

Further, that ad valorem rates would give a high duty per pound when prices are 
high at a time when the consumer most needs relief and the producer more able to bear 
competition. With the low price of wool, the duty per pound would be low when the 
consumer has least need of competing wools and the producer is least able to bear 
competition. 

I believe the statements of the board as to the effect of ad valorem rates not being 
easily collectible comes from their lack of knowledge of wool in its various conditions. 
Other men who are very familiar with wool say that the values of wools can be readily 
determined and the proper duty easily collected, and I have been assured by officials 
high in the customs service that such is the fact; also, that it would simplify the work 
of the customhouse if all wools were assessed by value. 

The board says an ad valorem rate would give a high duty per pound when wool is 
high and a low duty when wool is low. This follows as a natural sequence of the law 
of supply and demand, yet the following paragraph, in which is given a plan said to 



32 DUTIES ON WOOL AND MANUFACTUKES OF WOOL. 

be better in the opinion of the board than by ad valorem rates, for the assessing of wool 
duty, would have the very same objection. 

That the chief objections to the present rate on the grease pound could be met by 
levying some form of specific duty based on the clean or scoured content of the wool 
imported. 

If a specific rate on the clean pound is adopted, it will work out in this way, as shown 
by table appended, and for the purpose of illustration I will take 20 cents per clean 
pound as the flat rate of duty : 

Wool costing clean — Per cent. 

20 cents per pound, duty 20-cent rate 100 

30 cents per pound, duty 20-cent rate 66§ 

40 cents per pound, duty 20-cent rate 50 

50 cents per pound, duty 20-cent rate 40 

60 cents per pound, duty 20-cent rate 33J 

70 cents per pound, duty 20-cent rate 28f 

The range in price from 20 to 70 cents per pound clean, used in the above table, is 
conservative. Why the board should recommend a method of assessing the duty upon 
wool that shows a variation of 350 per cent in the rate of duty passes my compre- 
hension. It is true that this method is only one-half as objectionable as the present 
method, seeing it equalizes on the shrinkage, yet does not on the value, as the table 
shows. An ad valorem rate would place all on the same footing and lay a proper 
foundation for an equitable duty upon goods in place of the present inequitable one. 

One can not but think that this recommendation, which the board has made, must 
be considered as due to want of technical knowledge on the part of its members of the 
varying conditions and qualities of wool, and the various fabrics these wools are 
suitable for making. It would appear to be an error creating a tariff board whose 
members have had no business experience in the branches of trade upon which they 
are expected to report and offer recommendations upon. It would have been much 
better for the board to have confined its work to the gathering of statistics on the 
different schedules than to suggest methods that, if adopted, are not only inequitable 
but will work hardships to different branches of the woolen business. 

The objection by the board that an ad valorem duty has the effect of increasing the 
duty when wool is high and lowering it when wool is cheap abroad is not well taken. 
As when wool is cheap abroad, the home manufacturer should get his raw material on 
a parity of value with the foreign manufacturer or he can not compete. 

The only way I can see any force to this contention of the board's is that it simply 
-had the woolgrower in mind when recommending a method of assessing the wool 
duty by specific rate per clean pound in the hope that such might insure to the grower 
a high price when wool is cheap abroad and a still higher price when it is dear. The 
board seems to have left out of consideration the necessity of the home manufacturer 
being put in a position to compete with the foreign manufacturer, who has cheaper 
wool, due to a falling market. Besides, the consumer certainly should have some 
benefit in the price of commodities due to this market condition of the raw material. 

Interpretation of Tariff Board's Report. 
A. raw wool. 

Raw wool in Schedule K of the tariff law is divided into three classes. 
Class I is described in paragraph 361, Class II in paragraph 362, and 
Class III in paragraph 363. The duty on wools of Class I is fixed at 
11 cents per pound, on wools of Class II at 12 cents, and on wools of 
Class III at 4 and 7 cents per pound, according to value. In the 
event that the wools are imported washed, the duty on the first 
class is twice as much as if imported unwashed. If imported scoured, 
the duty is three times that on unwashed wool. The duty on wools 
of the third class, if imported in condition for carding, is three times 
that on unwashed wool. In dealing with raw wool the board treats 
the three classes separately, recognizing the difference in source, the 
conditions under which produced, and the amount of production. 

1. Third-class wools. — The board points out that practically no wool 
of the third class is produced in the United States. This wool is 
derived from a variety of sources fully considered (pp. 413-437), 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 33 

but the United States is not recognized among these sources except 
in a very limited manner. In the words of the board, '^ There is very 
httle wool of Class III now raised in the United States" (p. 437). 
Reviewing the history of the industry, the board further states (p. 
437): ''Twenty-five years ago there were 6,000,000 or 7,000,000 
pounds of wool of a carpet grade grown in some of the Western States 
and Territories, but it has been estimated that not more than a half 
million pounds of this domestic wool is now sold i.nnually to carpet 
mills." Apparently this is intended to say that not more than a half 
million pounds of this domestic wool is annually produced in the 
United States at the present time. As the total annual production 
of wool of all grades in the United States within recent years is about 
325,000,000 pounds, it is seen that the amount of carpet wool can not, 
under the board's statement, amount to more than about one-seventh 
of 1 per cent of the total wool output of this country. In view of 
the large demands for these wools from manufacturers of carpets and 
coarse woolen goods, it is evident that this class of wool does not 
require the protection of 4 cents per pound given it by the present 
tariff law. On the authority of the board it may be stated that the 
production of third-class wools in this country is so limited as to be 
a negligible quantity and that the necessity for protection may, 
therefore, be disregarded. 

2. Second-class wools. — Of the other classes of wool the board says 
(p. 299): "The great bulk of the wool grown in this country would, 
if imported, fall under Class I." The wools produced in the United 
States are not strictly comparable with those of foreign countries, 
and the board concludes (p. 382), that there is no reason for main- 
taining a distinction between first and second class wools. In the 
meantime, however, such a distinction is made in the tariff law, and 
in effect the board recognizes it in its discussion. The board further 
states that about two-thirds of the wool grown west of the Missouri 
River is "fine" or "fine medium," while about 25 to 30 per cent of 
that east of the Mississippi is classed as "fine." The territory 
devoted to woolgrowing in this country is separated by the board into 
two divisions. In the first division (Class A) , is included all the States 
west of the Mississippi River except Minnesota, Iowa, and Missouri. 
In the second division (Class B), is placed the States of Minnesota, 
Iowa, and Missouri, and all the States east of the Mississippi River. 
In the region designated as Class B, there are two well-defined sheep- 
raising regions; the one comprises Ohio and portions of adjacent 
States, the other the remainder of the territory east of the Mississippi 
River. In the Ohio region there are about 5,000,000 sheep, which 
produce a fine grade of merino wool. In the remainder of this 
"class" there are found about 10,000,000 sheep, whose wool is below 
fine merino grade, and may be properly described as "crossbred." 
Throughout a territory in the west, containing about 35,000,000 sheep, 
the cost of producing fine wool is found to be about 11 cents per 
pound. The cost in the East (Ohio) is stated to be about 19 cents 
per pound, while in the remainder of the territory east of the Missis- 
sippi it appears that "the net charge against the wool grown on sheep 
of the crossbred type is negligible." This statement is borne out 
by the figures of Table 19 (pp. 365-368), covering returns of 135 
crossbred flocks. 

S. Kept. 840, pt 2, 62-2 3 



34 DUTIES ON WOOL AND MANUFACTUKES OF WOOL. 

Of these crossbred flocks (p. 372) 121, or 90 per cent, "show 
receipts from other sources which equal or exceed the receipts from 
wool, and on an average for all these flocks the receipts from other 
sources constitute about two-thirds of the total receipts." This, 
moreover, is an exceptionally unfavorable showing, as the board 
states (p. 373): ''Of the 10,000,000 crossbred sheep a considerable 
part are kept under such conditions as to yield larger profits than do 
the crossbred flocks considered in Table XIX of this report." How- 
ever, the general conclusion is reached that ''for the crossbred 
flocks of this region as a whole the receipts from other sources are 
quite sufficient to meet the total costs of maintenance, and therefore 
the receipts from wool remain as profit." From this it may be fairly 
concluded that wools of the kind which compete with the output 
of these crossbred sheep do not need protection. This is clear from 
the fact that the wool income from these flocks is a clear profit, there 
being no charge whatever against it. It may, therefore, be safely 
concluded from the board's report that Class II wools also do not 
require protection, inasmuch as the cost of production is zero. 
As already noted, the board says (p. 382): "Practically all of 
the domestic clip, if offered for entry at our ports, would fall 
under Class I of the existing law. That is to say, the great bulk 
of the wool grown in the United States shows the use of merino 
blood, either immediate or remote, in its production. Imports under 
Class II are relatively unimportant and there is no longer valid 
reasons for the maintenance of the distinction as between English 
and merino wools so long in force." It is further stated (p. 384): 
"There is an enormous quantity of wool produced in Australasia 
and South America loiown in the trade as crossbred that has prac- 
tically no equivalent in our domestic production." The comparison 
already made is, however, as near as can be drawn — although it is 
true that most of the domestic wools show the use of some merino 
blood in their production. In a table (p. 385) the board recognizes 
their comparabihty by a direct comparison between domestic wools 
grading one-half blood and under, and foreign crossbred wools. 

3. First-class wool. — The real question in the wool schedule of the 
tariff act, in the opinion of the board, is the production of the western 
wools of fine merino quaHty. On page 301, under the caption ' 'Where 
competition centers," the board says that in Wyoming, Montana, Ore- 
gon, and Idaho there is a staple wool which corresponds with 
some of the best Australian wools, and it is there that the study of 
cost of production has apparently been most carefully made. It is 
noted that the ' 'Delaine wools of Ohio, Pennsylvania, etc., are claimed 
to be the strongest wools of merino blood raised in the world, etc."; 
these are the wools which later in the report (p. 377) are shown 
to be obtained from about 5,000,000 sheep at an estimated cost of 
19 cents per pound. On this small quantity of wool a special tariff 
protection would presumably have to be recommended by the board 
to safeguard it from competition. Omitting this portion of the fine- 
wool production, since, as noted by the board, the conditions are 
peculiar, the sheep being maintained for "general purposes" rather 
than primarily for their wool, attention will be concentrated on 
the western woolgrowing region, where, according to the board, "com- 
petition centers." Although the board has mentioned only the staples 
of Montana, Wyoming, Oregon, and Idaho as directly competing with 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



35 



the Australian, and although it admits that fine and fine medium 
wools constitute only 66 per cent of the total production of the western 
region, it may be assumed, for the sake of discussion, that the whole 
of the western region is to be regarded as devoted to the production 
of fine and fine medium wools, and, therefore, on a competitive basis. 
On page 330 of the report there is given a tabular statement showing 
by States the number of sheep studied in Arizona, California, Colorado, 
Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, 
and Wyoming. The total number of sheep so studied is 3,151,731, 
and these yielded 20,764,713 pounds of wool in the grease. The net 
charge against wool in this region is 10.9 cents per pound, while the 
average selling price is 15.9 cents per pound, a difference of 5 cents 
between the cost and selling prices. Considering only the States pro- 
ducing the very finest staple, namely, Wyoming, Montana, Oregon, and 
Idaho, the situation is not materially different. In Idaho an unusu- 
ally high cost, 17.3 cents per pound, was reported, in Montana the cost 
was 13.8 cents, in Oregon 10.9 cents, and in Wyoming 12.4 cents 
per pound. The average returns from Montana, Wyoming, and Idaho 
show a net charge against wool of 14.2 cents per pound. The remain- 
ing eight States of the group show an average charge of 8.4 cents 
per pound. In discussing the competitive conditions of production 
of wool, we may speak first of the western region as a whole, where 
woolgrowing is carried on as an independent industry, and we may 
subsequently consider these States as producing a special type of 
wool on an independent basis. 

The follomng table appears on page 330 of the board's report, 
except the addition of columns showing the per cent of shrinkage, 
the scoured-wool yield, the net charge, and the value or price per 
scoured pound. 

Table 5. — Showing , by States, total receipts and expenditures, capital per head, selling 
price of wool per pound, and net charge against wool per pound, of flocks investigated 
hy Tariff Board in the western United States; also the shrinkage and fine washed wool 
content of the grease wool. 



State. 


Number of 
sheep. 


Pounds of 
wool. 


Receipts. 


Wool. 


other sources. 


Total. 


Arizona 


180, 2.54 
115,192 
333, 526 
377,919 
514, 987 
163,255 
442, 142 
229. 713 
265, 645 
61,574 
467, 524 


1,181,882 
994, 687 
2, 110, 189 
2, 340, 483 
3,515,417 
1,011,046 
2, 613, 976 
1, 678, 993 
1, 901, 436 
391, 776 
3,024,828 


$184, 211. 65 
145, 018. 66 
300, 363. 13 
424, 567. 47 
649,455.46 
153, 810. 31 
364, 350. 12 
237, 000. 35 
330, 782. 52 
46,540.70 
475^739.44 


$246, 923. 23 
198, 881. 05 
402,245.42 
708, 954. 48 
568,063.24 
321,792.64 
508, 043. 29 
272,476.51 
42>1, 186. 13 
133,420.00 
599, 652. 89 


$431,134.88 


California 


343, 899. 71 


Colorado 


702, 608. 55 


Idaho 


1,133,521.95 


Montana 


1,217,518.70 


Nevada 


475, 602. 95 


New Mexico 


872, 393. 41 


Oregon 


509, 476. 86 


Utah 


754,968.65 


Washington 


179,960.70 


Wyoming 


1,075,392.33 






Total 


3, 151, 731 


20, 764, 713 


3, 311, 839. 81 


4,384,638.88 


7,696,478.69 







36 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



Table 5. — Showing, by States, total receipts and expenditures, capital per head, selling 
price of wool per pound, and net charge against wool per pound, of flocks investigated 
by Tariff Board in the western United States; also the shrinkage and fine washed wool 
content of the grease wool — Continued. 



State. 



Arizona 

California... 

Colorado 

Idaho 

Montana 

Nevada 

New Mexico 

Oregon 

Utah 

Washington 
Wyoming... 

Total - 



Expenditure. 



Labor. 



$141,612.16 
63,477.17 
198,695.23 
258,826.93 
278,993.71 
123,372.41 
245,427.12 
129,025.90 
182,114.75 
45,342.10 
336, 991. 56 



2,003,879.04 



Maintenance. 



$26, 566. 15 

93, 256. 82 

88,642.45 

364,205.34 

275,320.64 

59,341.56 

79,138.02 

143,723.14 

100,875.54 

38, 293. 92 

168,455.18 



1,437,818.76 



Miscellaneous 

and selling 

expense. 



$204,216.08 
113,755.55 
299,268.32 
491,558.27 
501,514.10 
180,901.47 
402,783.58 
183,571.01 
318, 869. 68 
47,465.27 
471,887.22 



3,215,790.55 



Total. 



$372,394.39 
270,489.54 
586,606.00 
1,114,590.54 
1,055,828.45 
363,615.44 
727,348.72 
456,320.05 
601,859.97 
131,101.29 
977,333.96 



6,657,488.35 



State. 



Arizona 

California... 

Colorado 

Idaho 

Montana 

Nevada 

New Mexico 

Oregon 

Utah 

Washington. 
Wyoming... 

Total - 



Net 

charge 

against 

wool per 

pound. 



$0. 106 
.071 
.087 
.173 
.138 
.041 
.083 
.109 
.093 

+.005 
.124 



,109 



Selling 
price per 
pound. 



,155 
,145 
,142 
,181 
,184 
,152 
,139 
,141 
,173 
,118 
,157 



,159 



Capital 
per head. 



$5.64 
5.18 
4.59 
6.13 
5.57 
6.08 
4.56 
4.92 
5.79 
4.58 
5.19 



5.30 



Rate of 

income on 

capital. 



5.8 

12.3 

7.6 



5. 
11. 

7. 
4. 
9. 

17.3 
4.0 



6.2 



Per cent 
of shrink- 



67.25 
67.25 
67.25 
67.25 
67.25 
67.25 
67.25 
67.25 
67.25 
67.25 
67.25 



67.25 



Scoured 

wool 

yield 

(pounds). 



387,066 
325, 760 
691,087 
766,508 
,151,299 
331,118 
856,077 
549,870 
622, 720 
128, 307 
990, 631 



6,800,443 



Net 
charge 

per 

pound 

scoured. 



$0. 323 
.217 
.265 
.628 
.421 
.125 
.253 
.332 
.284 

+.015 
.378 



,332 



Value per 

pound 

scoured. 



,473 
,442 
.433 
.552 
.561 
.464 
.424 
.430 
.528 
.360 
.479 



.485 



Report, p. 383. 



This table now serves as a foundation for an analysis of the com- 
petitive strength of the fine-wool producing region of the United 
States as compared with foreign countries. A comparison based on 
the grease pound would be misleading, because wools are found to 
shrink in different proportions. The competitive capacity of a 
region is dependent upon its ability to produce a certain quantity of 
scoured wool at a specified price. The manufacturer is not primarily 
interested in the grease-pound charge, but in the cost of the wool 
ready for spinning. This point is freely admitted by the Tariff 
Board, of course (p. 382), though it does not directly relate its data 
as to shrinkage with its production cost of grease wools. 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



37 



In connection with the study of shrinkage made on page 383 the 
board presents the following table: 

Table 6. — Amount and per cent of shrinkage of clean wool resulting from scouring 
specified grades of fine wool having their origin in given localities. 



Pounds in grease 

Pounds scoured 

Per cent of shrinkage 



Eastern 
United 
States, 
in United 
States 
mills. 



4, 262, 813 

1, 709, 002 

60.00 



"Western 
United 
States, 

in United 
states 
mills. 



46, 996, 576 

15,390,892 

67.25 



South American. 



In United 
States 
mills. 



1, 288, 660 

674. 755 

47.64 



In foreign 
mills. 



8, 846, 401 

3, 550, 597 

59.90 



Australian. 



In United 

States 
mills. 



11,067,147 

5, 730, 238 

48.22 



In foreign 
mills. 



29, 967. 258 

12,937,911 

56.82 



The following table from page 385 of the report throws additional 
light on the subject of shrinkage : 

Table 7. — Amount of clean wool and per cent of shrinkage resulting from scouring 
foreign crosshreds and domestic wools grading one-half blood and under. 



J blood and under (domestic wools): 

Poimds in grease 

Pounds scoured 

Per cent of shrinkage 

i blood: 

Pounds in grease 

Pounds scoured 

Per cent of shrinkage 

i blood: 

Pounds in grease 

Pounds scoured 

Per cent of shrinkage 

i blood: 

Pounds in grease 

Pounds scoured 

Per cent of shrinkage 



Eastern 
United 
States, 
in United 
States 
mills. 



9,101,974 

4, 858, 984 

46.62 



Western 
United 
States, 
in United 
States 
mills. 



15, 917, 633 

6, 003, 731 

62.28 

3, 213, 783 

1,483,743 

53.83 

1,510,985 

785, 474 

48.09 



South American. 



In United 

States 
mills. 



738, 711 

373, 482 

49.44 

4, 215, 956 

2, 785, 513 

33.93 

12, 537. 310 

8, 379, 071 

33.17 



In foreign 
mills. 



3, 720, 225 

1, 670, 291 

55.01 



27, 394, 408 

17, 431, 779 

36.44 



Australian, 
In United 

States 

mills. 



4, 467, 078 

2, 540. 609 

43.13 

1,995,100 

1, 252, 492 

37.26 

145, 267 

102,557 

29.40 



In Table 6 above is set forth the per cent of shrinkage undergone by 
western United States wools when scoured in United States mills, and 
the wool thus treated is stated to be ''fine wool." This shrinkage figure, 
stated as 67.25 per cent, is used in computing the fine scoured-wool 
yield of the grease wool actually studied and reported upon by the 
board in the western United States. The board gives the net charge 
per pound against wool in each of the States enumerated, and in 
ascertaining the cost per scoured pound this amount is multiplied 
by the number of pounds of grease wool necessary to produce a 
pound of scoured wool at the rate of shrinkage indicated. This 
shows, in each of these States, the investment in grease wool necessary 
to secure a pound of scoured wool. If the sale price of the wool in 
grease is applied to the number of pounds necessary to produce a 
scoured pound, the result is the price paid at current rates during 
the period of investigation for sufficient grease wool to produce a 
scoured pound. The average cost of the wool studied was 33.2 



38 DUTIES ON WOOL AND MANUFACTUEES OF WOOIi. 

cents per pound, based on the shrinkage percentage of 67.25, and 
the average price when scoured was 48.5 cents per pound. On the 
basis of the board's investigations, therefore, these figures represent 
the competitive situation in the fine- wool district of the West, which, 
as the board has expressed it, is the section "where competition 
centers." 

We may now turn to the question of the competitive strength of the 
Austrahan wools which compete with the fine wools of our Western 
region. The interesting point is not the price at which these wools 
are sold in Australia, but that which is paid for them in American 
mills. On pages 387-390 is a table showing "A record of actual 
importations and scourings in a representative American mill cover- 
ing more than 10,000,000 pounds of Class I wool." This amount is 
about one-half of the amount considered in the tabulation for the 
Western States. If limited to the Australian merino wools less than 
5,000,000 pounds have been included. Since approximately two- 
thirds of the total output of the western region is fine and fine medium 
wools, and the other third consists of wools somewhat comparable to 
the crossbred wools of Australia — grading half-blood or below — all 
of the Australian wool given in the board's record of actual imports 
and scourings at a representative American mill, may, therefore, be 
included. 

The results thus secured show that, taking all of the wool, the 
average price paid per scoured pound was 50.8 cents, while for the fine 
merino wools, the price paid per scoured pound was about 50 cents. 
This figure should be compared with the one already obtained for 
the western region, which shows an actual cost per scoured 
pound of 33.2 cents, and an actual realized price paid per scoured 
pound of 48.5 cents, assuming the total output to be of merino 
origin. The figures show that entirely independent of the payment 
of tariff duties on the importations of Class I wool, the American 
industry was in a distinctly competitive position. Comparing the 
fine merino staples raised in the Northwestern States of the United 
States, including Idaho, Montana, Oregon, and Wyoming, with the 
merino wools for which figures are given, it appears that the cost of 
the fine staples in the United States was 13.7 cents in the grease, 
or 41.8 cents scoured, and the realized price paid was 16.9 cents in 
the grease, or 51.5 cents per scoured pound, while the price paid for 
the Australian merino by American mills was over 50 cents per 
pound. This appears to show that, with freight rates included, the 
western wool-raising industry is fully able to hold its own against the 
Australian staple. 

In the preceding computation, as already noted, the shrinkage was 
67.25per cent, which is the rate quoted by the board for fine wools of 
the West. As elsewhere shown in the board's report, the Territory 
wools consist of about 66 per cent of fine wool and 34 per cent of the 
lower grade product. A fairer basis of computation might be found 
in the use of the shrinkage percentage computed as a weighted or true 
average inasmuch as the various grades of wool shrink in different pro- 
portions. Such a weighted or true average has been worked out upon 
the basis of the board's figures for fine wools and wools of one-half 
blood, three-eighths blood, and one-fourth blood. This shrinkage 
percentage is 64.32, which may be taken as the general shrinkage of 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



39 



Territory wools. In the following table a computation is presented 
showing the same comparison except that in this instance the per- 
centage of 64.32 is used instead of 67.25 per cent. 

Table 8. — Showing by States net charge per pound against Territory wools. 



States. 



Wool 
(pounds). 1 



Per cent of 
shrinkage. 



Equivalent 
scoured 

wool 
(pounds). 



Net cost 

charge per 

scoured 

pound. 



Value per 
scoured 
pound. 



Arizona 

California... 

Colorado 

Idaho 

Montana... 

Nevada 

New Mexico 

Oregon 

Utah 

Washington 
Wyoming . . 

Total. 



1,181,882 
994,(387 
2,110,189 
2,340,483 
3,515,417 
1,011.046 
2,613,976 
1,678,993 
1,901.436 
391.776 
3,024,828 



64.32 
64. 32 
64.32 
64.32 
64.32 
64.32 
64.32 
64.32 
64. 32 
64. 32 
64.32 



421,695 
354,904 
752,915 
835.083 

1,254; 300 
360, 740 
932,666 
599,064 
678, 431 
139, 785 

1,079,258 



$0. 297 
.199 
.244 
.484 
.386 
.115 
.232 
.305 
.200 

+.014 
.347 



$0,434 
.406 
.398 
.507 
.515 
.426 
.389 
.395 
.484 
.330 
.440 



20, 764, 713 



64.32 



7,408,841 



.305 



445 



» Report, p. 330. 

Protection and the price of raw wool. — It is not necessary, however, 
to depend solely upon the figures given by the board for the 
cost of producing raw wool, or the ''net charge against raw wool" for 
conclusions as to the amount of protection needed by the wool in- 
dustry in the United States. The board has not only given the 
figures relating to costs in the region studied, but has also investigated 
the prices of raw wool in leading markets. It is shown that the 
price realized for wool in the western wool-growing region, including 
the States of Arizona, California, Colorado, etc., was 15.9 cents 
per pound. If the shrinkage of this wool be taken at the figure, 
67.25 per cent, given by the Tariff Board (p. 383), it will appear that 
the actual scoured wool costs approximately 48 cents per pound. This 
represents the cost of wool which must be purchased in the grease at 
the rate mentioned by the Tariff Board, as actually realized by the 
sellers of the wool, in order to supply the buyer with a pound of 
scoured wool ready for manufacture. 

In Volume I of the board's report (p. 65) is presented a table, 
taken from the bulletin of the National Association of Wool Manu- 
facturers, showing the total wool product of the United States for 
1910. This table shows that the scoured value of all wool produced 
in the United States in the year 1910, aggregating 321,362,750 
pounds and yielding 141,805,813 pounds of scoured wool, was 51.12 
cents per pound, rracticaliy no wool of the third class was pro- 
duced in the United States in 1910, but the product of the year is 
composed of first and second class wools, while in the far West 
region, the product is largely fine wools. The table shows that 
the vaJue of the output in Nevada is 54 cents per scoured pound; 
that of California, 46 cents; that of Colorado, 47 cents; that of 
Arizona, 53 cents; and that of Texas, 55 cents, etc. Local 
and seasonal variations will always occur, but we may accept 
the figure already cited from the cost of production report — 
15.9 cents per pound, giving a scoured value of about 48 cents per 
pound — as corresponding substantially to the market value. Else- 



40 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

wheie the board has presented the quotations of American wools in 
Boston, giving the so-called '^ territory wool," of which we have been 
speaking, as the product of Montana, Wyoming, Utah, etc., on a 
scoured basis. 

The prices there given for 1910 range from 50 to 74 cents per pound 
accordmg to grade, while for 1911 the prices range from 40 to 62 cents. 
This also confirms the accuracy of the figures already mentioned. 
In a study of the prices charged for Australian wools in London, the 
board shows that wools belonging to Class I sold in London in 1910 
at prices ranging from about 16 cents to about 32 cents per pound, 
according to grades. In October, 1911, the range was from about 
17 cents to about 44 cents (p. 34, Vol. I). In another table (p. 213, 
Vol. I) the board gives prices per pound for certain foreign wools in 
England, as reported by the Bradford Chamber of Commerce. In 
this table are given two kinds of Australian wools, namely, ''Port 
Phillip" and ''Adelaide." The former averaged 26.4 cents per pound 
in 1910 and the latter 18.3 cents. These figures are identical with 
those given from another source in the table previously cited, and 
represent the price charged for two good grades (not the best) of 
Australian wool, which on importation into the United States would 
rank as Class I. If these be accepted as representative and a mean 
taken, we shall have 22.4 cents per pound as the price (taken as the 
mean) of wool competing with our western product. 

The board has made an elaborate study of shrinkage in the second 
volume of its report. Elsewhere we have used figures showing the 
shrinking of Australian wools in American mills. These figures can 
not be used for the present purpose, because Australian wools are 
imported in a skirted condition and consequently shrink less 
than they would if imported in their natural condition. It is 
necessary, therefore, to ascertain the shrinkage of Australian wools 
in the mills to which they are sent for shrinkage in a natural condition. 
The board (p. 387) states that the shrinkage figure for total wool 
production of all countries given by Helmuth, Schwartze & Co., is 
universally accepted in the trade and names 48.54 per cent as that of 
Australasia. In its study of actual shrinkage in the United States it 
shows that Australian wool shrinks 48.22 per cent (p. 383). If we 
accept the figure 48.54 as representing the shrinkage, it will appear 
that the figure 22.4 cents, which we have already given as the 
assumed mean price of Australian wools competing with our western 
wools, must be divided by 51.46 (or 100 minus 48.54) in order to 
find the value of the wool in a scoured pound. This computation 
gives 43.5 cents. 

Previous figures have shown that scoured wool from western 
fleece may be taken as worth 48 cents per pound. The difference, 
then, is 4.5 cents (assuming that freight rates to the mills offset 
one another), and this must be reckoned as an ad valorem rate 
on 43.5 cents, which would give a result of about 13 per cent ad 
valorem, the protection apparently demanded by western wool pro- 
ducers, assuming the figures we have given to be correct. It is clear 
that in the case of the more expensive Australian wools there would be 
no advantage whatever. This is shown by the figuj'es of the Tariff 
Board representing the actual importation and scouring in a repre- 
sentative American mill covering more than 10,000,000 pounds of 
Class I wool. Considering the figures given for Australian merinos, it 



DUTIES ON WOOL AND MANUFACTUBES OP WOOL. 41 

is found that about 50 cents per scoured pound was paid, so that the 
Austi alian wool cost the producer actually more than the western 
wool; or, allowing 2 cents a pound freight on the western wool to 
the mill, something like the same price, probably a little less in some 
cases. In this case apparently actual experience with a large quan- 
tity of wool did not indicate any necessity for tariff protection. In 
general, with Australian grease wool at 20 cents a pound or higher, 
there is little necessity for tariff protection as indicated by actual 
purchases in the market. At that price the western woolgrower is 
able to furnish his wool in successful competition on the scoured- 
pound basis, accepting the actual prices found in the Tariff Board's 
report as a basis for the comparison. 

Competitive conditions. — The position of the western woolgrower 
compared with that of the Australian producer may be discussed 
without reference to prices in the market, and simply upon a basis of 
cost, as reported by the board. In that case it will be seen from 
Table 5 that a cost of about 11 cents per pound was found to 
exist on the average in the west, while m Australia the cost was 
*'a few cents a pound" and in South America ^'4 to 5 cents." Taking 
4 to 5 cents a pound as the cost in South America and Australia, 
and selecting the higher figure — 5 cents — just as we have selected 
the higher figure — 11 cents — from the board's report, there is 
found to exist a disadvantage in the United States of about 6 cents 
per pound on grease wool. This supposedly represents the amount 
by which the net charge against wool in the tJnited States exceeds the 
net charge against wool in South America and Australia. The com- 
parison, however, has not taken into account cost of transportation. 
The subject of transportation is discussed by the board in Volume II 
(pp. 351,352), where it appears that ''$2 a hundred pounds is believed 
to be a fair estimate for the average cost of transportation of grease 
wool from the west to Boston," while (p. 352) ''the cost of transpor- 
tation from the Australian producer to Boston ranges between $1,841 
and $3,191." 

The average cost of transportation of Australian wool is thus about 
$2.50 a hundred pounds, or one-half cent more per pound on the Aus- 
tralian wool than on the western American wool. We may, therefore, 
regard the western American woolgrower as suffering a disadvantage, 
not of 6 cents a pound but of about 5i cents. If it be assumed, on the 
basis of the board's shrinkage figures (p. 385), that the total shrinkage 
of western wools in the United States mills grading one-half blood 
and under is the average of the shrinkages given for the different 
grades, we shall have a shrinkage of 54.96 per cent. Our 5^ cents, 
therefore, will represent the cost of 45.04 per cent of the disadvan- 
tage we suffer in the production of a pound of scoured wool. The 
total disadvantage will then be about 12.2 cents. Accepting the 
prices given in the board's table for actual importations of Australian 
wool, and prices paid therefor (pp. 387-389), we may again take 
the value of a scoured pound of Australian wool at an American mill 
as 50.8 cents. In that case 12.2 cents reckoned as an ad valorem 
upon the value of the imported Australian wool would be nearly 
25 per cent, or, measured in cents per pound, would simply be itself 
the amount of the duty called for in a specific form, namely, 12,2 
cents. This apparently would be the maximum duty which could 



42 DUTIES ON WOOL AND MANUFACTURES OP WOOL. 

be demanded by the western wool producer on wools of the kind re- 
ferred to under the most unfavorable circumstances. On the finer 
grades with a higher shrinkage this percentage would be larger, b\it 
in that case the price assumed must be a good deal higher. The 
ad valorem percentage would be much the same. 

It should be observed, however, that a protection of 5.5 cents per 
pound of grease wool, or 12,4 cents per pound of scoured wool, would 
amply protect most of the States included in the western region. 
There would be very few of them in which the cost of production is 
so high as to require a protection of 5.5 cents per grease pound This 
result may be exemplified as follows: Let the net charge against wool 
in South America and Australia be taken as 5 cents. The cost of 
production or net charge against wool reported in California is 7.1 
cents. Allowing one-half cent for freight charge as before, the net dis- 
advantage for California as a producer would be 7.1 minus 5.5, or 1.6 
cents. This would be less than one- third of the 5.5 cents protection 
mentioned. In the same way the protection required in Colorado 
would be 8.7 minus 5.5, or 3.2 cents. In Nevada, with a cost of 4.1 
cents net, protection required would be still smaller. New Mexico, 
with a cost of production of 8.3 cents, would be only at a slight dis- 
advantage as compared with a foreign cost plus freight of 5.5 cents. 
Washington, which has no net charge on wool but a very slight 
credit to wool, would need no protection whatever. On the whole, 
probably not more than three or four States of the group would 
require protection of 5.5 cents. 

In the following table is computed the net disadvantage under 
which the Western States labor in the production of a scoured pound 
of wool and the ad valorem duty which would be necessary in order 
to place the western woolgrower upon a basis of equality with the 
Australian and South American grower in the American market. 
This ad valorem rate is computed upon a basis of 50.8 cents for 
Australian wool and 37.4 for South American wool. These figures 
have been obtained by averaging the quotations given by the board 
for the actual experience of an American mill in the importation of 
10,000,000 pounds of foreign wool. It should be noted that the ad 
valorem duties which are thus indicated vary enormously according 
as the price of wool varies and, of course, as the disadvantage per 
scoured pound varies. The difficulty in the argument is found in 
the fact that a uniform price is assumed for all foreign wools, whereas 
in fact these foreign wools consist of a series of different grades. 
None of the figures can be said therefore to be computed, in the strict 
sense, with any authority. It is observable that the average rate of 
protection needed to safeguard against Australian competition is 
about 30 per cent as shown by this table and that needed to protect 
against South American competition is about 40 per cent. This 
would seem to indicate that South America was a more dangerous 
competitor than Australia, a statement whose absurdity is self- 
evident. In this computation, as in others that have preceded, it 
will be observed that there are several of the Western States in which 
no tariff protection is needed while in several others only a very small 
amount is called for. The high averaoje rate thus shown is due to 
the reported high cost of production in two or three States where costs 
are stated as abnormally high. 



DUTIES ON WOOL AND MANUFACTUKES OF WOOL. 



43 



Table 9. — Ad valorem and specific rates necessary on Australian and South American 
wools in order to equalize territory wool costs. 





Net charge per 

pound against 

wool.i 


Difler- 
ence in 
cost be- 
tween 
United 
States 
wool and 
that of 
Austra- 
lia and 
South 
America. 


Total dis- 
advan- 
tage of 
scoured 
pound 
on shrink- 
age basis 
of 64.32 
per cent. 


Average cost 

per scoured 

pound.2 


Ad valorem 
rate necessary 
to equalize dif- 
ference in cost 
of- 


Specific rate 
per pound 
necessary 
to equalize 
difference 
in cost 


State. 


United 
States. 


Austra- 
lia and 
South 
Amer- 
ica. 


Austra- 
lian. 


South 
Amer- 
ican. 


Austra- 

lian 

wool 

(per 

cent). 


South 
Amer- 
ican 
wool 
(per 
cent). 


between 
wools of the 

United 
States, Aus- 
tralia, and 

South 
America. 


Arizona 


$0. lOG 
.071 
.087 
.173 
.138 
.041 
.083 
.109 
.093 

+.005 
.124 


$0. 055 
.055 
.055 
.055 
.055 
.055 
.055 
.055 
.055 
.055 
.055 


10.051 
.016 
.032 
.118 
.083 

-I-.014 
.028 
.054 
.038 

+ .0G0 
.069 


$0. 143 
.045 
.090 
.330 
.232 


$0. 508 
.508 
.508 
.508 
.508 
.508 
.508 
.508 
.508 
.508 
.508 


$0,374 
.374 
.374 
.374 
.374 
.374 
.374 
.374 
.374 
.374 
.374 


28.15 
8.86 
17.72 
64.96 
45.67 


38.24 
12.03 
24.06 
88.24 
62.03 


$0. 143 


California 


.045 


Colorado 


.090 


Idaho 


.330 


Montana 


.232 


Nevada 




New Mexico 


.078 
.151 
.106 


15.35 
29.72 
20.87 


20.86 
40.37 
28.34 


.078 


Oregon 


.151 


Utah 


.106 


Washington 




Wyoming 


.193 


37.99 


51.60 


.193 






Total 


.109 


.055 


.054 


.151 


.508 


.374 


29.72 


40.37 


.151 







Report, pp. 330, 350. 



2 Based on Report, pp. 387-390 and pp. 390-391. 



5. The Ohio region. — It will be observed that nothing has been 
submitted in the foregoing data on the Ohio region, which is reported 
as having the highest cost of production in the country, that being 
a net charge of 19 cents per pound against wool. This would 
apparently call for a much higher protection than any as yet 
spoken of. The board averages the 5,000,000 sheep of the Ohio 
region with the western sheep and the crossbred flocks, and thereby 
makes an average cost the country over at 12 cents per pound, a 
manifestly incorrect proceeding. It should be frankly admitted that 
on the board's estimate the Ohio region, and a very few of the western 
States, would need a protection in excess of 20 per cent. An average 
rate of protection sufficient to offset the difference in cost of produc- 
tion between the bulk of the western region and the foreign wool- 
growing countries would not help them in the least. In this connec- 
tion a further point should be noted. The cost of production of 
wool in the Ohio region, as given by the board, is 19 cents per pound 
on the average. Inquiries as to shrinkage show that this wool 
shrinks 46.62 per cent; in other words, 19 cents is 53.38 per cent of 
the cost of a scoured pound. 

The cost of such a scoured pound, therefore, may be taken as 
35.6 cents. This must be compared with the supposed cost advan- 
tage in Australia. In the latter country, as we have seen, the cost of 
production ma}^ be taken as 5 cents. However, at least 2 cents 
must be added in this case as the freight disadvantage, because of 
the comparative nearness of the Ohio region to the mills. From the 
standpoint of Ohio, cost in Australia ma}^ be taken as 7 cents. The 
theoretical disadvantage in the Ohio region is thus 35.6 cents minus 
7, or about 28.6 cents. Figuring this as a percentage upon the 
cost of the competitive Australian wool imported into the United 
States, which may be taken as 50.8 cents a scoured pound, on 
the average, it is found that 28.6 cents represents over 55 per cent 
ad valorem. This is very much more than the protection amounts 
to, accorded under the present specific basis. In the board's table 



44 DUTIES ON WOOL AND MANUFACTUEES OP WOOU 

of actual importations and scourings in a representative American 
mill (pp. 387-389) the equivalent ad valorems run from about 34 
per cent to about 55 per cent. In a very few instances there are 
equivalent ad valorems as high as 55 per cent. It would seem, then, 
that the Ohio wool-producing region is not protected now on the 
assumption that the board's cost figures are correct and that, if it is 
to be protected at all, the tariff on wool would have to be very much 
raised above its present figures, so as to give a rate of 28 or 29 cents 
on the scoured pound and of at least 55 per cent ad valorem. 

Summing up the discussion, therefore, it may be concluded that a 
study of comparative prices actually reahzed on western wools and 
actually paid by importing American mills, and paid at open sale in 
the London market, show that the western American woolgrower can 
meet Australian and South American competition without any pro- 
tection. A study of cost disadvantages would indicate the necessity 
not to exceed 25 per cent duty ad valorem upon the whole wool 
output of the Western States, and would show that in the majority 
of these States a duty of very much less than this, say, 10 to 15 per 
cent, would be ample, while 20 per cent would completely safeguard 
all, except a relatively small number of sheep in the less carefully 
managed flocks of the West and in the Ohio region. 

It should be added that there is nothing to prevent either the west- 
ern or the Ohio growers from shifting to the crossbred flocks, whose 
profitableness in the United States has been demonstrated to such an 
extent as to show no net charge against the wool . From the protective 
standpoint, therefore, the whole question is that of imposing a duty 
for the mere sake of keeping a small percentage of American sheep 
farmers from the necessity of shifting from sheep of the merino type 
to those of the crossbred type. 

Net cost charge per pound against wool: 

United States (Report, p. 377) $0.19 

Australian and South American 07 

Difference 12 

Total disadvantage per scoured pound on shrinkage basis of 46.62 per cent 224 

Average price per scoured pound: 

Australian . 508 

South American 374 

Rate of duty necessary to equalize difference: 
Specific — 

Australian and South American 12 

Ad valorem — 

Australian (per cent) w 44. 09 

South American (per cent) 59. 89 

6. Summary of findings on raw wool. — These findings on raw wool 
may be summarized as foUows: 

1 . Class III wool needs no protection, because it is scarcely produced 
at all in the United States. 

2. Class II wool needs no protection, because those of our wools 
which compete with it are produced at a very low cost of production. 

3. Class I wools need no protection as indicated by actual figures 
of sales. As shown by estimated cost of production the needed duty 
would not exceed 15 to 20 per cent. A duty of 25 per cent would 
be considerably in excess of the requirements of production in the 
West that are indicated by the figures of the Board; while in the 
Ohio region the industry is partly at least, incidental to general farm- 
ing and can not be considered on the competitive footing. 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 45 

B. TOPS. 

The subject of top manufacture is discussed chiefly on pages 621-645 
(Vol. III). Here are given data showing the actual yield from greasy 
wool of scoured wool, tops, noils, and wastes of various kinds; a 
discussion of compensatory duties; an outline of the methods of 
getting costs ; and tables showing the cost of converting wool into tops 
in a number of American mills, whose product has been combined for 
the purpose of showing the general results. 

1. Wastes and compensatory duties. — The first problem which the 
board has to deal with is that of shrinkage in the scoured wool used, 
so it seeks to ascertain what quantity of tops can be manufac- 
tured from a given amount oi scoured wool. This shrinkage is 
then made the basis for computations of the amount of compensa- 
tory duty required. On pages 622, 623, the board says: 

The average yield of tops over a considerable period differs in typical American 
mills by less than 5 per cent, and the amount of this average yield is approximately 
85 per cent. But a compensatory duty based on the average yield would be inade- 
quate in the case of tops made from wool of fine quality; while, conversely, a com- 
pensatory duty high enough to take care of fine wool would be somewhat more than 
compensatory for tops made from the lower grades. * * * 

Whatever may be the yield of scoured wool in tops, that part of it that is unfit for 
tops is by no means a complete loss to the manufacturer. Noils are worth quite regu- 
larly 60 per cent of the value of the scoured wool from which they are made, and they 
form from 60 per cent to 90 per cent of the wastes that accrue in top making. Comb 
waste is worth practically as much as scoured wool; card waste, as a rule, much less; the 
two together, forming from 5 per cent to 30 per cent of the total waste, should normally 
bring 40 per cent of the price of an equal weight of scoured wool. In any case the 
manufacturer recovers in the value of his wastes fully half the value of the scoured 
wool consumed that does not appear in his tops. 

Assuming then that 100 pounds of fine wool gives 80 pounds of tops, the loss of 20 
pounds reappears in the form of waste worth at least as much as 10 pounds of wool. 
The manufacturer therefore in this case is entitled to a compensatory duty on tops 
that exceeds the duty on wool by no more than 10 per cent of such duty. This is of 
course on the assumption that compensatory duty shall be fixed entirely on a weight 
basis. 

2. MetJiod of computing tariff duties. — The board in this discussion 
continues the assumption found in the existing law, that two classes 
of duty are necessary, the one intended to offset the loss of weight 
in shrinkage, the other, the differences in labor and capital between 
the United States and foreign countries. It is evident that in 
carrying out that inquiry on the basis of the board's figures, several 
methods may be adopted. 

(a) First method. — The most obvious method of computation 
on this basis is as follows: According to the board, 1 pound of 
scoured wool produces 80 per cent of 1 pound of tops, and this 
would mean that 90 pounds of wool would make 80 pounds of tops, 
allowing for 10 pounds of recovery in wastes. Assuming that 
scoured wool is worth 50 cents a pound, 80 pounds of tops would 
cost $45, and 1 pound of tops would cost 45/80 of a doUar, or 56.25 
cents. The excess cost of material for 1 pound of tops, therefore, 
is 6.25 cents. The board finds as a result of its investigation 
(p. 645) that ''the cost of making tops in the United States is 
about 80 per cent greater than abroad." If the American manu- 
facturer gets domestic wool of substantially the same spinning value 
as English wool, and at the same price, 50 cents, no allowance is 
needed for ''compensatory duty." If comparison be made on a duti- 



46 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

able basis, we must assume the importation of wool subject to duty. 
While this is not necessarily the case, we may expand our assumption 
so as to provide that the scoured wool used in manufacture is 
imported at 50 cents, duty unpaid, and that this is the same 
price the English manufacturer pays for his scoured wool at 
the factory. Then, if we assume a duty of 20 per cent, for the sake 
of argument, on wool, it is clear that the American manufacturer 
will have to pay 60 cents for his pound of wool after the tariff duty 
has been liquidated. Now., since 90 pounds of the wool produce 
only 80 pounds of tops, it is evident that, at 60 cents, the cost of 
the 90 pounds would be $54, and 1/80 of this would be 67.5 cents. 
Seven and one-half cents, therefore, would be the additional pound 
value of the material going into the tops made from duty-paid wool. 

As already stated, the excess material cost per pound of tops made 
of nonduty-paid wool at 50 cents is 6.25 cents. Assummg that 
the amount of waste is the same in England and the United States, 
it appears that the cost of manufacture from. duty-paid wool at 20 per 
cent implies an additional expense of IJ cents, which represents the 
specific compensatory duty that would be needed. This would have to 
bereckoned as a percentage of 56.25, the presumed cost of the top ma- 
terial in England. It would in that way amount to 2.2 per cent. The 
board shows that the actual cost of manufacturing tops in the United 
States from Australian 70-80's is 7.25 cents per pound. Adding this to 
the 67.5 cents gives 74.75 cents as the cost of a pound of tops in the 
United States on the basis of the board's figures. In the English mills 
the cost of conversion is shown as about 100 per cent, and in the 
United States as 180 per cent. Taking 7 J cents as 180 per cent, 
the cost in England would be 4.03 cents per pound. Deduct- 
ing this from 7.25 cents, the cost in the United States, leaves 3.22 
cents, which represents the excess conversion cost of producing tops in 
the United States. As an ad valorem percentage of 56.25, this gives 
5.72 per cent, which, added to 2.2 per cent, the compensatory duty, 
gives 7.92 per cent over the duty on wool, or 27.92 per cent. 

(b) Second method. — Another method of computation may be 
deduced from the board's work. In the passage already cited the 
board says (p. 623) that the manufacturer is entitled to a com- 
pensatory duty on tops that exceeds the duty on wool by no 
more than 10 per cent of such duty. Taking the same case we 
have already assumed, with scoured wool at 50 cents and an 
import duty of 20 per cent ad valorem, in this case equal to 10 
cents per pound, the compensatory duty on tops would be the 
wool duty, 20% + (10% of 20% = ) 2% = 22%, or 10^+ (10% of 
100 = ) 10 = 11 cents, a duty of 11 cents, or 22 per cent. We 
found that if the wool employed was actually imported from 
abroad and manufactured subject to the waste indicated by 
the board, the material in a pound of tops would cost 67.5 
cents, while in England it would be 56.25 cents. The duty on 
56.25 cents at the rate of 22 per cent would be 12.38, which added 
to 56.25 cents would be 68.63 cents, or, in this case, decidedly more 
than enough to cover the cost in the United States as indicated by 
the board. The duty required to offset the difference in labor and 
other costs would be the same as stated in the first method, 5.72 per 
cent, to which would be added the compensatory duty of 2 per cent, 
and the duty on wool of 20 per cent, or a total of 27.72 per cent on 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 47 

tops. It is clear that the rate of duty, by this method of computa- 
tion, would change rapidly as the price of wool, duty paid, was 
increased. 

And as the wool became more expensive, the duty required would 
be a smaller ad valorem percentage. In the shrinkage table giv^n by 
the board (pp. 387-391), the price per scoured pound, duty paid, on 
the best grades of wool such as we are discussing, is very seldom as 
low as 50 cents, and is occasionally as high as 60 cents per pound or 
more. In these cases the amount of duty would fall off. 

In the foregoing computation the assumption has been that the 
EngHsh manufacturer is able to land his tops at New York without any 
cost for seUing charges, transportation, insurance, or commissions in 
the United States. That, of course, is important. The duties already 
sketched, therefore, are unduly high, if it be desired simply to cover 
cost of production. The board has shown that freight charges from 
Liverpool to Boston are about one-third of a cent per pound on wool. 

This takes no account of shipping charges in England or from 
Boston inland, to say nothing of the charges for other items in the 
cost of marketing. It would probably be a conservative estimate 
if the English manufacturer were regarded as being obliged to incur 
an expense of 3 cents per pound for his marketing and freight 
charges. Such an allowance, if made, would largelv offset the differ- 
ence in cost of production. If, on the basis of our illustration, follow- 
ing the Tariff Board, it be assumed that the cost of getting out a 
pound of completed tops in the United States with wool at 
50 cents a pound scoured, and the rate of duty at 20 per cent, 
was 75 cents, while in England it was 56.25 cents plus 4.03 
cents, or 60.28 cents, the allowance of 3 cents a pound already 
referred to being then made, the landed cost (United States) of 
English tops would be 63.28 cents. Deducting this from 75 cents 
would leave 11.72 cents, wliich would be about 19 per cent, or less than 
the raw-wool duty of H. R. 11019. This would mean that a 20 per 
cent duty would suffice to protect the American manufacturer against 
the competition of English producers in tops as well as in raw wool. 
Of course, in this case it should be borne in mind that the 3-cent 
allowance would have to be made also in case of the raw-wool duty. 
That is to say, if 20 per cent on raw wool was protective with wool at 
the same price in England and the United States, a less duty than 
that would be necessary in practice owing to the difference in cost 
of transportation, etc. 

(c) Third method. — Still another method of computation may be 
adopted, based on the board's figures. A manufacturer may buy 100 
pounds of wool and manufacture it into tops. According to the 
board he will get only 80 pounds of tops out of the 100 pounds of 
wool. This would mean that the manufacturer would have to invest 
the cost of 100 pounds of wool in order to get 80 pounds of tops. 
In so doing he would obtain wastes which he could sell for something, 
and which the board says would be worth as much as 10 pounds of 
clean wool. In our former computation we assumed that the wastes 
had been sold at this rate. On this supposition it is evident that in 
order to get 80 pounds of tops the manufacturer has to buy 100 pounds 
of clean wool, or, at 50 cents per pound, he must invest $50. Each 
pound, then, of tops costs him for raw material 62.5 cents, while his 
competitor in England is getting his wool at 50 cents and his tops 



48 DUTIES ON WOOL AND MANUFACTUKES OF WOOL. 

at presumably the same relative rate. Now, in the United States 
assume that a duty is imposed equal to 20 per cent. The 100 pounds 
of clean wool cost $60, instead of $50, and 80 pounds of tops cost 
the same. That is to say, each pound of scoured wool costs the 
American manufacturer 75 cents, while his English competitor is 
getting his material at 62.5 cents a pound. 

The compensatory duty allowed for by the Tariff Board is 10 per 
cent of 20 per cent, or 2 per cent ad valorem, or 1 cent per pound. 
The difference in cost of labor and investment is 3.22 cents, the 
same as in our former illustration. This is now figured as an ad 
valorem of 62.5, or slightly more than 5 per cent. The specific 
duty under this basis of estimate then would be 1 cent plus 3.22 
cents, or 4.22 cents, while the ad valorem duty would be 2 per cent 
plus 5 per cent, or 7 per cent. This is slightly less than by the former 
method because of the higher valuation given to the wool going 
into the tops, due to the fact that no allowance has been made for 
the income from the wastes. On some accounts this is a fairer 
basis of reckoning than the other, because of the fact that the process 
of manufacture requires the larger amount of wool which is indicated 
in this second method. Of course in this case the allowance made 
for freight, etc., would still have to be recognized, and would work 
out as before in more than neutralizing the difference in cost of 
production of tops indicated by the board. 

3. Study of top prices. — The question of the duty on tops may be 
approached from the standpoint of prices rather than from cost of 
production. The board has given in the early part of its report (Vol. I, 
p. 106) a table showing the values abroad of specified classes of tops. 
It finds that 20 cents per pound is the minimum valuation for tops 
abroad, and that only in depressed conditions would tops of low quality 
sell for 20 cents or less. The lowest price given in the tables of quota- 
tions for 1910 is 24.8 cents, and the highest is 64.9 cents, the latter 
being a quotation for the very best grade intended for the spinning 
of very fin^ yarns. The quotation on tops intended for the spinning 
of so-called 64 's to 70 's, which correspond to what we call in this 
country fine or one-half blood, are the quotations which should 
be used for comparative purposes in the present discussion. These 
quotations were from 54.8 to 62.9 cents, the mean being 58.9 cents per 
pound. If it be true that raw wool of a given quality used for 
making these tops can be imported on a scoured pound basis at 
about the same cost from Australia into the United States as into 
England, it may be supposed that the price of these tops in Eng- 
land is less than that in the United States (no duty on raw wool) 
by the excess cost of production of tops in the United States. For 
the grade of tops considered, this excess cost of production has 
been found to be about 3.22 cents per pound; in other words, the 
cost of the same tops in the United States should be about 62.12 
cents. Figuring the 3.22 cents as an ad valorem upon 62.5, gives 5.2 
per cent as the necessary duty on tops, or, adding compensatory 
duty in the event that a raw-wool rate of 20 per cent is charged, 
we should have 7.2 per cent, which roughly corresponds with the 
showing already made for the grade discussed. If we should com- 
pute the rate on the very finest grades it would, however, fall con- 
siderably below this figure, while an allowance for freight, insur- 
ance, etc., amounting to as much as a cent a pound, would reduce 



DUTIES ON WOOL. AND MANUFACTUEES OF WOOL. 



49 



the required protection to 25 per cent or probably much less (grant- 
ing a raw- wool duty of 20 per cent). 

In the following table are presented domestic and foreign costs of pro- 
ducing tops for every cost figure reported in the statement (p. 642), 
showing variations in the cost of converting wool into tops. The 
domestic costs are given by the board as a result of its investigations, 
and the foreign costs are computed on the supposition that the cost of 
making tops in the United States is about 80 per cent greater than 
abroad (p. 645). The difference between domestic and foreign costs 
would represent in each case the disadvantage in cost of production 
under which the United States labors and would therefore be the 
figure which should be computed as a percentage of the foreign costs 
of tops in order to ascertain the ad valorem rate necessary to protect 
the American producer. 

Table 10. — Variations in domestic and foreign conversion cost of wool into tops for a 

period of 25 months. 





'Cents per pound. 


Tariff Board report, p. 642.] 












6 months. 


Dif- 
fer- 
ence. 


6 months. 


Dif- 
fer- 
ence. 


7 months. 


Dif- 
fer- 
ence. 


6 months. 


Dif- 
fer- 
ence. 


Quality of top. 


Do- 
mes- 
tic. 


For- 
eign. 


Do- 
mes- 
tic. 


For- 
eign. 


Do- 
mes- 
tic. 


For- 
eign. 


Do- 
mes- 
tic. 


For- 
eign. 


Unwashed territory, one- 
half blood or above 

Australian and domestic, 
one-half blood and above. 

Unwashed territory, three- 
eighths blood 


5.37 

4.91 

4.63 

4.31 

3.86 
3.24 


2.98 

2.73 

2.57 

2.39 

2.14 
1.80 


2.39 

2.18 

2.06 

1.92 

1.72 
1.44 


7.60 
6.79 
6.19 
6.10 

5.62 

4.48 


4.22 

3.77 

3.44 

3.39 

3.12 
2.49 


3.38 

3.02 

2.75 

2.71 

2.50 
1.99 


8.59 

7.75 

7.05 

6.31 

5.90 
4.89 


4.77 

4.31 

3.92 

3.51 

3.28 
2.72 


3.82 

3.44 

3.13 

2.80 

2.62 
2.17 


10.85 

10.05 

8.82 

8.13 

6.66 
6.09 


6.03 

5.58 

4.90 

4.52 

3.70 
3.38 


4.82 
4.47 
3.92 


Australian or domestic, 
three-eighths blood 

Austrahan or domestic high, 
one-quarter blood 

Quarter blood 


3.61 

2.96 
2.71 







4. Summary of top study. — (a) If it be assumed that the English 
and American manufacturers start with wool of the same quality at 
a uniform price, say 50 cents, the tariff duty not being fully in operation 
because a home supply exists, it appears that no allowance need be 
made for compensatory duty, and that the difference in cost of pro- 
duction shown by the board per pound of tops is 3.22 cents, which, 
computed as an ad valorem upon 56.25, the cost of the material going 
into a pound of tops, is 5.72 per cent ad valorem. 

(b) If it be assumed that the wool used is actually imported into 
the United States, a duty is paid at the rate of 20 per cent, with no 
allowance for freight, insurance, etc., the difference in cost must 
include a compensatory element figured by the board at 2 per cent, 
or in this case a cent a pound, and a duty to oft'set the difference in 
cost of manufacture, equal to about 3.18 cents, which, figured on 
the cost of manufacture in England, gives about 5.09 per cent, and 
this added to the 2 per cent compensatory duty gives a rate of about 
7.09 per cent over and above the raw-wool duty, or 27.09 per cent 
in all. 

(c) The rate of allowance for compensatory duty will vary in ad 
valorem equivalents with the cost of the raw wool in England, and 
would probably increase or decrease as the cost of the raw wool 

S. Rept. 840, pt 2, 62-2 1 



50 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

increases or declines, notwithstanding top costs are lower for cheaper 
grades of wool. 

{d) The foregoing figures are based upon the assumption that no 
allowance for cost of transportation, insurance, shipping charges, 
etc., is necessary. Such allowance on these accounts as is cus- 
tomary should be made in order to have the figures hold good in 
practice. It is observable that an allowance or 3 cents a pound 
would about offset the difference in cost, both compensatory and 
labor, and investment cost that has been recognized. Even if it be 
assumed that such costs of transportation are only 1 or 2 per cent 
of the value of the tops, a duty of 25 per cent (inclusive of raw-wool 
duty) would be ample protection. 

Noils and wastes. — ^The board has dealt with the subject of noils 
and wastes incidental to the manufacture of tops, explaining the 
way in which these wastes originate and the extent to which they 
are produced in the process of developing tops from scoured wool. 
It is shown (p. 623) that 100 pounds of fine wool gives 80 pounds of 
tops, the difference being waste, which is supposed to be worth as 
much as 10 pounds of wool. In the process of manufacturing worsted 
yarns the top is converted into roving, and a waste of about 2 or 3 
per cent occurs, while subsequently there is an additional waste of 
about 2 per cent. On the whole the board concludes that the soft 
wastes made in drawing and spinning are 4 per cent, the hard wastes 
2 J per cent, and the invisible wastes and shrinkage 2 J per cent, so that 
the yield of yarn from tops would be 9 1 per cent. This would mean that 
on every 100 pounds of tops there is a production of soft wastes equal 
to 4 pounds and of hard wastes equal to 2J pounds. In the process 
of converting yam into cloths the waste varies considerably, running 
from 5 per cent to 25 per cent. The board estimates this waste at 
about 20 per cent of the value of the yarn from which it is made. 
That is to say, the gross volume of waste produced in making yarn is 
from 5 to 25 per cent of the weight of the yarn, while the wastes thus 
produced are supposed to be worth about 20 per cent, on the average, 
of the total value of the yarn which has given rise to them in the 
process of working up. 

Raw-Wool Duty for Noils, 

So long as a specific duty is levied upon wool and the low products 
of wool, the cost of production, dependent as it is upon the amount of 
wool needed in the manufacture of the cloth, would determine the rate 
of duty to be imposed. That is to say, the value of the wastes would 
properlj^ be reckoned as a part of the value of the total output of the 
productive operation, including, as that would, tops and wastes, or 
yarn and wastes, or cloth and wastes. The duty would need, there- 
fore, to be figured as a composite matter, the amount needed to 
protect it, granting that wastes in manufacture were equal in amount 
m different countries, being dependent upon the raw-wool duty, 
in a certain sense, although the actual figure would depend quite 
largely upon the demand the industries which used these wastes 
made for them, and so fixed their price. They can not be said 
to have any definite cost of production apart from that of the 
principal products in the course of making raw wool there brought 
mto existence. The board has, therefore, reckoned these wastes and 



DUTIES ON WOOL. AND MANUFACTURES OF WOOL. 51 

their value as constituting a deduction from the cost of producing 
tops from wool, yarn from tops, and cloth from yarn. Where an 
ad valorem system of duty is employed, the situation is diflPerent, 
because the necessity of computation designed to ascertain the 
amount and value of these wastes need not be undertaken. The 
wastes will be used again simply as wool. 

They act as a substitute for wool in various processes of manufac- 
ture, and to that extent displace wool which would otherwise be pur- 
chased for the purpose of manufacture. This is true of noils and wool 
wastes generally. All that is needed, therefore, in a country which 
levies an ad valorem duty upon raw wool is to treat the wastes in the 
same way that raw wool is treated. If this were not done it would 
be cheaper for manufacturers to import such wastes from abroad for 
use in domestic manufacture. They would, to that extent, cut off 
the demand for domestic wastes, and the effect of this would be to 
lower their price in the market, to say nothing of the effect thereby 

Eroduced on the manufacturing process in which these wastes were 
rought into existence. Inasmuch as a reduction in the value of the 
wastes produced in manufacture would mean an increase in the cost 
of carrying on the principal operation which gave rise to that, a 
lower duty on such wastes would amount to an infringement upon 
the duty by which the principal process was itself protected. In 
the same way, a duty on wastes that was higher than the duty on 
wool itself would operate to keep out foreign products of the same 
kind and would thereby enable the manufacturer to gain greater 
protection under the operation of the compensatory duty than they 
otherwise would have. 

With ad valorem rates of dutjr, therefore, the indicated level of 
rates for the noils and wastes will be identical with the rates on 
raw wool. The board has nothing to say with reference to spe- 
cific cost of production of noils and wastes since they are by- 
products as just indicated. They supply the data which could be 
used to work out a duty if a specific rate were desired. But their 
argument naturally points to the conclusion, where ad valorem rates 
are employed, that the duty should be collected at the same rate for 
wastes as for raw wool itself. 

C. YARNS. 

The Tariff Board has worked out the cost of making yarns in th(3 
same way as for tops, and a similar plan may be pursued in estimating 
the rate of duty required on yarns. 

1. Tariff duty computed. — Continuing the illustration of wool at 
50 cents per pound scoured in England, and a duty of 10 cents per 
pound or 20 per cent ad valorem on the wool imported into the 
IJnited States, with tops thereafter costing on the basis of the 
board's figures, say 75 cents per pound, as against about 60 cents in 
England, the computation will be as follows: A compensatory duty, 
according to the board, equal to 8 per cent of the compensatory 
duty on tops. Assuming that this duty is 22 per cent, 8 per cent 
of it will be 1.8 per cent ad valorem. Beyond that the difference in 
cost depends upon the kind of yarn made, its ply and count. The 
board gives material on the cost of making yam (pp. 645-650), and 
on page 648 enumerates the cost of converting tops into 2-ply yarns, 



52 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

for counts ranging from 28's to 60's. First taking the lowest count, 
it is seen from the table given that the total conversion cost in the 
United States is 12.62 cents per pound, while in England it is said to 
be about one-half, or 6.31 cents. The loss of weight in yarn making 
is 9 pounds per 100 (p. 624). This means that in the United States 
the cost of the yarn material would be 75 X 100-^91 + 12.62, or 95.04 
cents, 75 cents being assumed as the cost of a pound of tops. 

In England the corresponding pound of yarn would cost about 
60X1004-91 + 6.31, or 72.24 cents. Figuring the difference in cost, 6.31, 
as a percentage of 72.24 cents, it is seen that the ad valorem equivalent 
is about 8.73 per cent, and adding 1.8 per cent for the compensatory 
duty would be 10.53 per cent over and above 25 per cent on tops, or in 
all, 35.53 per cent. This may be tested by comparing the value of 
yarn product resulting from a pound of tops in the two countries. We 
/have seen that in the United States this would be 95.04 cents, while in 
England it would be 72.24 cents. The difference is 22.80 cents, which, 
reckoned as an ad valorem of 72.24 per cent, is about 31 i per cent. The 
same compu tation may be carried out on the other pi an, suggested in con- 
nection with tops above, i. e., allowing for the value of recovered wastes. 
In that case the computation would be as follows: One hundred 
pounds of tops yield on the average 91 pounds of yarn, but the wastes 
are worth as much as 4J pounds of tops. In other words, the material 
cost of getting 91 pounds of yarn equals the cost of 95^ pounds of tops. 
Assuming that tops are worth 75 cents in the United States, 91 
pounds of yarn will cost $71,625 for material, and the unit cost will be 
78.7 cents. Adding 12.62 cents for conversion, the cost of one pound 
of yarn is given as 91.32 cents in the United States, and by the same 
method 69.31 cents in England. The compensatory duty here is 4^ per 
cent of 25 per cent, or 1 . 125 per cent, and the conversion cost 9.1 per cent, 
or 10.225 per cent in all — a total duty of 35.225 per cent ad valorem. 

In these computations again no allowance has been made for the cost 
of transportation necessary to put the manufacturer on a basis of com- 
petition with the American producer. If 3 cents a pound allowance 
were made upon the yarn value, it would work out in a somewhat 
different way from that in the case of tops, however, owing to the 
higher value of the yarn. In that case we have to reckon the 
cost of the yarn straight through from the raw wool to the yarn. 
Assuming that the cost of the tops was, as already stated, the 
amount needed to produce a pound of yarn, meaning, as shown 
by the board (p. 623), 9 per cent greater than the amount of yarn 
used, it would appear that 75 cents must be regarded as 91 per 
cent of the amount of tops needed to produce a pound of yarn. This 
would mean that the tops necessary to produce a pound of yarn would 
cost 82.42 cents. In England it would be necessary to spend about 
67 cents to get tops necessary to produce a pound of yarn. Adding 
the cost of manufacturing a pound of yarn in the United States at 
the same rate as before, 82.42 cents must be increased by 12.62 cents, 
giving about 95 cents. In England 67 cents must be increased by 
6.31 cents, giving 73.31 cents. The total difference in cost is thus 
shown to be 21.69 cents. An allowance of 3 cents per pound for the 
marketing charges would cut this to 18.69 cents per pound, which 
gives an ad valorem on 73.31 of about 25.5 per cent. 

2. Change in ply and count of yam. — It should be noted that the ad 
valorem rate supposedly necessary to protect the producer owing to 



DUTIES ON WOOL AND MANUFACTURES OP WOOL. 



53 



differences in cost varies materially in accordance with the changes in 
ply and count of yarn. It should be figured, therefore, for each ply 
and count of yarn. The board has furnished data for a few of the dif- 
ferent grades of yarn, and in the following table the computation has 
been followed through upon the basis indicated above. 

In the following table is shown the two grades of yarn (two-ply 32 's 
and 40's) whose cost is given by the board in the IJnited States and 
England with the difference in cost computed as an ad valorem on 
the quotation at Bradford of these particular grades of yarn: 

Table 11. — Rates of duty on yam necessary to equalize difference in cost between the 

United States and England. 

[Cents per pound. Tariff Board report, pp. 114, C50.] 



Item. 



Conversion cost from tops: 

United States (excluding interest) 

England (including interest) 

Difference 

Mean quotations at Bradford (January-November, 1911) 
Rate of duty necessary to equalize the difference: 

Ad valorem 

Specifiic 



Yam. 



Two-ply 
32's. 



14.48 
8.10 



6.38 
40.30 

» 15. 83 
6.38 



Two-ply 
40's. 



17.99 
10.60 



7.39 
49.20 

115.02 
7.39 



1 Per cent. 



In studying this table, it should be borne in mind throughout that 
the assumption has been made that raw wool is purchased by Amer- 
ican and English manufacturers on the scoured basis without pay- 
ment of duty at New York and Liverpool, respectively; that subse- 
quently the American manufacturer has paid his duty at 20 per cent 
ad valorem on raw wool, and has taken the raw material to his estab- 
lishment for the purpose of manufacturing it into tops and yarns. 
This assumption may fairly be made, and the table may fairly be 
relied upon in view of the assumption that the raw-wool duty is ad 
valorem. If the duty be levied as at present upon the grease-pound 
basis, quite different results will be produced according to wool 
shrinkages more or less, and according to methods of scouring in this 
country different in their fine-wool contents from those which are pur- 
sued aoroad. 

3. Price study of yarns. — In its first volume (p. 114) the board 
has furnished data for a price study of yarns. These may be used for 
the purpose of checking the analysis already made from the stand- 
point of cost of production. In the section referred to, the board cites 
the quotations in England for worsted and hair yarns reported by the 
Bradford Chamber of Commerce. In 1909, it gives worsted 2-ply 40's as 
worth 65.9 to 75 cents per pound. In the section of the report of the 
Tariff Board devoted to the subject of manufacturing (Vol. Ill, p. 648) 
the cost per pound of converting tops into 2-ply 40's in the United States 
is given as 17.98 cents, and further (p. 650) the corresponding figure in 
England is given as 10.6 cents. The difference would be 7.38 cents, so 
that the inference may be fairly drawn that the cost of these same yarns, 
which sell at, say, 70 cents a pound in Bradford, England, should be 
about 7.38 cents higher, or 77.38 cents in the United States, assuming 
that the wool out of which they are made was free. In that case the 



54 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



duty required to equalize the cost of production on these yarns would be 
7.38 cents divided by 70 cents, or 10.5 per cent. Working this out 
with English cost taken as one-half American the duty would be 12.8 
per cent. The former basis is the fairer. This would be a duty 
mtended to equalize the conversion cost between England and the 
United States. 

No compensatory duty need be figured in this case for the equaliza- 
tion of wastes consequent upon the shrinkage of duty-paid wool, 
because this is a price, not a cost figure. These results should be com- 
pared with the cost of production estimates already given, as based 
upon the figures. of the board. Here, again, no allowance is made 
for transportation and shipping charges, which would cut the duty 
from 10.5 per cent to possibly 6 or 7 per cent. 

The question whether the yarns mentioned are placed upon the 
same comparative basis depends upon the use of substantially the 
same class of wool in manufacture. It can not be stated whether 
the wool thus used was uniform in the counts of yarn cited for quo- 
tation at Bradford with those considered by the board in the 
United States. If we should take the average of a number of plys 
and counts of yarn a nominally more general figure would be obtained, 
but this appearance of general applicability would be only nominal, 
because the thing which is of interest is the power to compete in 
specified grades of yarns. Absolutely correct results can be obtained, 
therefore, only by comparing the cost of production or price of speci- 
fied counts with the corresponding figures for foreign conditions. 

The Board states that the average value of yarn imported into 
the United States was $1.05 in 1911. This was an insignificant 
amount, because of the restrictive character of the duties, which did 
not compete with domestic yarns. It can not be stated what counts 
they represented, but, assuming that they were those most commonly 
used for fabrics, it might be assumed that the conversion cost was the 
amount as already stated, in which case the rate of protection called 
for would probably be not to exceed 7 per cent. 

The following table shows the ad valorem duty required to protect 
the American producer against English competition, figuring English 
cost as the difference between English quotations for tops and yarns 
at Bradford while American cost is taken as computed by the board. 
This would include interest in the English costs but the same has 
been done by the board in figuring the English costs actually given 
by it. 

Table 12. — Conversion costs of tops into yarn with rates necessary to equalize costs 

between England and the United States. 

[Cents per pound, j 



Item. 



Two-ply 
40's. 



Conversion costs from tops: 

United States (excluding interest) 

England (as shown by deducting Bradford quotations of tops from yarns) 

Difference 

Mean quotations at Bradford (January to November, 1911)2 

Rate of duty necessary to equalize yarn costs: 

Ad valorem 

Specific 




Report, p. 650. 



8 Report, p. 114. 



3 0.69 of 1 percent. 



DUTIES ON WOOL AKD MANtTFACTURES OF WOOL. 55 

It may be fairly concluded, therefore, that the price showing of the 
board, taken in conjunction with the figures for conversion cost, the 
latter being estimated upon the basis of foreign price, would point to 
the necessity of an ad valorem duty of not more than 7 per cent 
above the rate on tops. If tops were 5 per cent, as they would be 
if there were no duty on raw wool, the duty on yarns would thus be 
12 per cent. If a duty of 20 per cent were levied on raw wool the 
duty on yarns would be from 30 to 35 per cent — say, 32 per cent. 

D. CLOTH. 

The board has computed the cost of production of cloth in a 
manner decidedly different from that which has been employed in 
connection with the cost of yarns and tops. For the latter products 
it ascertained costs by obtaining figures on standard processes, appli- 
cable to very large volumes of product, and tabulated them in such 
a way as to get at unit cost. It has rejected this method in the case 
of cloth, because of the belief that such a plan is not applicable. The 
board says that it has been obliged to base its relative costs upon spe- 
cific samples of home and foreign products. This means that it has 
simply taken selected pieces of cloth and obtained from a few 
mills cost estimates thereon. The board does not state the number 
of mills consulted, but a letter from Chairman Emery states that 
from 3 to 15 mills were asked to figure on each sample in the 
United States, and that the board does not know how many mills were 
consulted for each sample abroad. Furthermore, the samples that were 
estimated upon by the different mills were not in all cases samples 
made by those mills. The board says: 

Our agent * * * visited the mills with specific samples and worked out with 
the proper officials the cost under each separate process. * * * By this detailed 
analysis by processes the estimates came as near to the actual costs as the mill itself 
was able to make them. 

The board submits two classes of samples, the one numbered con- 
secutively from 1 to 53, the other from A to N. The first set of sam- 
ples were compared chiefly with costs in English mills. ''Samples of 
identical fabrics cut from the same piece were taken to England and 
to the Continent." These were American cloths. On the samples 
A to N the costs were secured on "similar cloths." In no case did 
a German manufacturer figure on the cost of producing an American 
fabric. They merely selected cloths which "came very near the 
sample fabric." 

1. Character of figures. — It should be definitely stated that no con- 
fidence whatever can be placed in these figures, for the following 
reasons : 

{a) The cost figures secured were not obtained for identical fabrics 
produced in the same mills, but were secured for fabrics which were 
similar; many of which were not produced at all in the mills to which 
they were submitted, although they might have been. 

(h) There is no positive knowdedge as to the number or representa- 
tive character of the mills that made estimates on the samples. 

(c) There is no knowledge as to the methods by which the figures 
secured from the difi*erent mills estimating on the same sample were 
averaged. The board admits that not all of them kept their cost 
figures on the same basis or in like detail. 



56 DUTIES ON WOOL AND MANUFACTUBES OF WOOL. 

{d) Slight variations in fabric or slight errors in selecting mills of 
the same relative grades of efficiency would in the case of unit costs 
on single pieces of one fabric give rise to differences which do not 
seem great in themselves when stated as unit costs, but which in the 
aggregate would make very large variations in cost of operation for a 
period of months, weeks, or even days. 

While thus absolutely rejecting the board's cost figures on cloths, 
we may subject the figures to an analysis for the purpose of ascer- 
taining what they indicate with respect to the rates of duty that 
would be needed in order to protect the American manufacturer were 
we to accept the theory that a duty equal to difference in cost is re- 
quired by protective principle. 

In column 1 of the following table the number of the sample is 
given, such number corresponding to the number given in volume 
3, pages 651 ff., of the board's report. Column 2 designates the 
kind of cloth by representative letters (with key at the bottom of the 
page). In columns 3 and 4 is shown cloth cost in the United States 
and in England, respectively. Columns 5, 6, and 7 relate to conver- 
sion cost and show American cost, English cost, and the difference 
between the two. This conversion cost is the outlay required for con- 
verting yarn into cloth. The board says (p. 651) that this conversion 
cost means — 

the total expense incurred in manufacturing yarn into finished cloth ready for use by 
the customer. It does not include the cost of the yarn, but does include the amounts 
expended for both direct and indirect labor, for departmental materials in the several 
processes of manufacture, and the charge for general expense. 

Referring to the board's cost schedule, the general expense schedule 
is found on page 636, where general expense is analyzed into works 
expense and fixed charges, the latter including insurance, taxes, depre- 
ciation, and other items. 



DtJTIES ON WOOL AND MANUFACTURES OF WOOL. 



57 



Table 13. — Tariff Board cloth and conversion estimates of samples in United States and 
in England, with difference in conversion costs, and the resulting tariff duty. 



A Staples and piece dyes. 

B. Serges. 

C. Fancy woolens. 

D. Fancy worsteds. 

E. Women's wear. 

F. Lightweight women's wear. 

G. Cotton warp. 





5 

.a 

\4 


Cloth cost. 


Conversion cost. 


Per cent of American con- 
version cost to United 
States cloth cost. 


Per cent of English conver- 
sion cost to English cloth 
cost. 


Per cent of 

difference in 

conversion 

costs. 


a 
ii 

a 

§ 

>> 

■t-s 

D 

-o 

a 

w 
m 

<1 


3 

s 

'C 

c3 
+j 

bo 

a 
"3 


Sample No. 


pi 

d 

t— ( 


a 

03 

a 

a 
1— 1 




a 
< 


a 




a 




a 

(H C/^ 

Ol 




bog 

wf 


1 


F 
G 
F 
G 
F 
F 
F 
E 
C 
F 
C 
B 
C 
C 
E 
E 
E 
C 
B 
E 
C 
B 
B 
G 
C 
G 
E 
C 
B 
D 
C 
C 
E 
D 
E 
B 
A 
D 
B 
E 
A 
B 
E 
A 
D 
A 
A 
A 
B 
D 
A 
D 
A 


$0. 295 
.28 
.248 
.323 
.337 
.447 
.438 
.52 
.772 
.595 
.869 
.649 
.453 
.654 
.798 
.692 
.68 
.702 
.74 
.716 
.729 
.894 
.835 
.811 
.903 
.799 
.998 
.847 
.828 
1.11 
1.206 

""i.'642' 
.965 
1.494 
1.556 
1.26 
1.166 
1.06 
1.063 
1.141 
1.417 
1.104 
1.661 
1.504 
1.709 
1.503 
1.349 
1.332 
1.446 
1.789 
2.136 
2.233 


$0. 1535 
.224 
.1518 
.1796 
.1996 
.2872 
.2566 
.3391 
.4134 
.3378 

"'.'345i' 
.3323 
.4050 
.3654 
.4721 
.4667 

"."5637' 
.4397 
.4911 
.47 
.6061 
.546 
.5175 
.4763 
.408 

'".'76!" 

'"."5606' 
.6833 
.4711 

'i.'io'" 

.8421 
.7426 

.85 

"i."654" 
.9512 
1. 0996 
.9152 
.8190 
.7641 

'i.'257" 
1.234 


$0. 080 
.083 
.089 
.106 
.118 
.127 
.132 
.133 
.145 
.165 
.165 
.168 
.174 
.178 
.190 
.212 
.212 
.213 
.215 
.216 
.217 
.222 
.235 
.240 
.245 
.249 
.250 
.254 
.258 
.265 
.282 
.290 
.291 
.293 
.294 
.300 
.300 
.311 
.320 
.359 
.360 
.362 
.364 
.365 
.370 
.386 
.382 
.392 
.396 
.402 
.603 
.632 
.693 


$0. 0401 
.0415 
.0488 
.065 
.0556 
.0572 
.0614 
.0661 
.0689 
. 0698 
.081 
.0777 
.0863 
.0777 
.0853 
.1107 
.1067 
.094 
.091 
.1034 
.089 
.1193 
.104 
.0985 
.1136 
.109 
.1043 
.098 


$0. 0399 
.0415 
. 0402 
.041 
.0624 
.0698 
.0706 
.0669 
.0761 
.0952 
.084 
.0903 
.0877 
.1003 
.1047 
.1013 
.1053 
.119 
.124 
.1126 
.128 
.1027 
.131 
.1415 
.1314 
.140 
.1457 
.156 


27.12 
29.64 
35.89 
32.82 
35.01 
28.41 
30.14 
25.58 
18.78 
27.73 
18.99 
25.89 
38.41 
27.22 
23.81 
30.64 
31.18 
30.34 
29.05 
30.17 
29.77 
24.83 
28.14 
29.59 
27.13 
31.16 
25.05 
29.99 
31.16 
23.87 
23.38 

"27." 93" 
30.36 
19.68 
19.28 
23.81 
26.67 
30.19 
33.77 
31.55 
25.55 
32.97 
21.97 
24.60 
22.59 
25.42 
29.06 
•29. 73 
27.80 
33.71 
29.59 
31.03 


26.12 
18.53 
32.15 
36.19 
27.86 
19.92 
23.93 
19.49 
16.67 
20.66 

'22.52" 
25.97 
19.19 
23.34 
23.45 
22.86 

"26.' 53' 
20.24 
24.29 
22.13 
16.25 
20.81 
21.06 
21.90 
24.02 


13.53 
14.82 
16.21 
12.69 
18.52 
15.62 
16.12 
12.87 

9.86 
16.00 

9.67 
13.91 
19.36 
15.34 
13.12 
14.64 
15.49 
16.95 
16.76 
15.73 
17.56 
11.49 
15.69 
17.45 
14.55 
17.52 
14.60 
18.42 


25.99 
18.53 
20.48 
22.83 
31.26 
24.30 
27.51 
19.73 
18.41 
28.18 

'26."i7' 
26.39 
24.77 
28.65 
21.46 
22.56 

'22.' 35' 
29.11 
20.91 
27.87 
23.35 
24.07 
27.05 
30.59 
38.24 


30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 
30 


55.99 


2 


48.53 


3 


56.48 


4 


52.83 


5 


61.26 


6 


54.30 


7 


57.51 


8 


49.73 


9 


48.41 


10 


58.18 


11 




12 


56.17 


13 


56.39 


14 


54.77 


15 


58.65 


16 


51.46 


17 


52.56 


18 




19 




20 


52.35 


21 


59.11 


22 


50.91 


23 


57. 87 


24 


53.35 


25 


54.07 


26 


57.05 


27 


60.59 


28 


68.24 


29 




30 


.117 

.1114 

.1078 

.1357 

.1207 


.148 

.1706 

.1822 

.1553 

.1723 


16.69 

'2!.' 53' 
19.86 
25.62 


13.33 
14.15 

"i4.'96' 
17.85 


21.11 

'36.' 46" 
22.73 
36.57 


51.11 


31 




32 


66.40 


33 


52.73 


34 


66.57 


35 




36 


.154 

.1436 

.1165 


.146 

.1564 

.1945 


14.00 
17.05 
15.69 


9.38 
12.41 
16.68 


13.27 
18.57 
26.19 


43.27 


37 


48.57 


38 


56.19 


39 


















41 


.2053 
.152 


.1547 
.210 


29.29 
17.88 


13.56 
14.82 


22.07 
24.71 


52.07 


42 


54.71 


43 




44 


.1877 

.1671 

.1861 

.16 

.1924 

.1512 


.1773 

.2029 

.1999 

.222 

.1996 

.2448 


17.81 
17.57 
16.92 
17.48 
23.49 
19.79 


10.67 
13.49 
11.70 
14.77 
14.80 
18.38 


16.82 
21.33 
18.18 
24.26 
24.37 
32.04 


46.82 


45 


51.33 




48.18 


47 


54.26 


48 


54.37 


49 


G2.04 


50 




51 














62 


.2376 
.339 


.3944 
.354 


18.90 

27.47 


18.46 
15.85 


31.38 
28.69 


6i.38 


53 


58.69 







58 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

2. Mode of commuting tariff. — It is evident that to ascertain the 
tariff on the board's theory needed to protect the American manu- 
facturer in the process of cloth making the Enghsh conversion cost 
must be deducted from the American, as is done in column 7, 
and the difference must be regarded as the amount of protection 
needed. In columns 8 and 9 the relation of total American con- 
version cost to total American cloth cost and the percentage of 
English conversion cost to total English cloth cost, have been figured, 
for reasons which will later appear. In columns 10 and 11 are given 
the percentage of the difference in conversion cost to American cloth 
cost and to English cloth cost. There may be a division of opinion 
which of these should be used as the basis for figuring the tariff duty 
required. Taking the most extreme case, however, it may be assumed 
that an English manufacturer produces cloth at the cost indicated by 
the board, ships it to the United States without expense for transpor- 
tation and without interest on capital, commission charges, or other 
outlays of the kind, and sells it in the American market. In that 
case, if he sold at cost, the American producer would need a tariff 
based on the English cost as compared with the difference in conver- 
sion cost, supposing that the duties were to be levied upon an ad 
valorem basis. 

These figures are given in column 11 and range from 13 per cent up 
to 38 per cent or more. The average is 24.49 per cent. This figure 
may be taken then as the extreme rate of duty needed to protect the 
American manufacturer on the basis of cost of production under the 
theory of the board, accepting its cost figures as unquestionably 
correct. 

It will be noted, however, that this duty amounts only to a protec- 
tion on the process of making cloth. It must, therefore, be' added to 
the duty properly to be levied under the board's figures upon the 
material, yarn, of which cloth is made. In order to get absolutely 
correct results on this subject it would be necessary to have cost 
figures, from the raw material up, for every kind of yarn used in the 
manufacture of these cloths. Those can not be obtained, because the 
board does not give complete figures for every ply and count of yarn. 
It may, however, fairly be assumed that the board is honestly repre- 
senting the case in stating that the costs for yarn which it has pre- 
sented, as well as its cost for tops, are representative. Supposing 
that to be true and accepting the average cost of production of its tops 
and yarns as the basis for duty upon the yarns used in producing each 
of these representative samples, it will be found (see tabulation else- 
where) that the cost figures on yarns and tops point to the necessity 
of an average duty of, say, 30 per cent on the yarn in order to equalize 
differences in cost of production. 

This estimated rate has been set down in column 12 as the addition 
which should be made to the duties presented in column 11 for the 
purpose of getting at the total required duty. In column 13 is pre- 
sented the combination of the two duties enumerated in columns 11 
and 12 which represents the total tariff duty on these samples required 
under the board's figures. It will be found that this makes an 
average duty in the aggregate (foot of column 13) amounting to 
about 55 per cent. 

However, for the purpose of practical legislation this can not be 
accepted as the basis of action. It has already been noted that no 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



59 



allowance was made for transportation from England to the United 
States nor for the actual and necessary capital cost independent of 
profit necessary for carrying the goods, insuring them in transit, pay- 
mg commissions in this country, and placing them on the market. 
It will be regarded as a very conservative estimate to figure this 
outlay at 10 per cent of the cost of goods from the factory to the 
retailer, entirely independent of profit, and this leaves 45 per cent. 
Moreover, it wUl have been noted that in certain portions of the dis- 
cussion of estimated cost of yarns, figures were given which included 
an element of profit, because the board presented the data in this 
manner. If this item included for profit were eliminated, the figures 
of cost would be correspondingly reduced, and the rates of duty needed 
for protection would be likewise lessened. 

Table 14. — German and American sample cloth and conversion costs, with per cent of 
conversion cost, and resulting tariff duty. 

[Tariff Board report, pp. 694 to 704.] 







Cloth cost 










a 
o 


Per cent of 










(including 
selling ex- 


Conversion cost. 


a- 


O o 


difference in 
conversion 








Kind of cloth. 


pense). 








a 


a fl 


cost. 


CI 

o 
>1 




Sam- 












.a 


6 


3 

-a 

a 








>> 

a 








mm 


"SO 


h 


a . 


3 
T3 


H 








(3 

CD 
O 

a 


a 

03 

o 

i 


a 


a 

t-A 


er cent 
sion CO 
cloth CO 


Is 


(I o 

a 


^8 

(D 
O 

o 


a 

m 
m 


•1 

s 






< 


o 


Q 


Ph 


Ph 


Eh 


e 


< 


rt 


A 


Worsted suitings. 


$1.71 


$1,119 


$0. 495 


$0. 283 


$0. 212 


28.95 


25.29 


12.40 


18.95 


30 


48.95 


B 


do 


1.86 


1.222 


.50 


.278 


.222 


26.88 


22.75 


11.94 


18.17 


30 


48.17 


C 


Black drape wor- 






sted 


2. 2462 
2. 2333 


1.522 
1.328 


.784 
.71 


.489 
.436 


.295 
.274 


34.90 
31.79 


32.13 
32.83 


13.13 

12.27 


19.38 
20.63 


30 
30 


49.38 


D 


Fine worsted 


50.63 


E 


Fancy worsted... 


1. 5626 


1.129 


.413 


.246 


.167 


26.43 


21.79 


10.69 


14.79 


30 


44.79 


F 


Men 's heavy serge 


2.321 


1.395 


.666 


.370 


.296 


28.69 


26.52 


12.75 


21.22 


30 


51.22 


G 


Men's serge 


1. 9778 


1.208 


.527 


.315 


.212 


26.65 


26.08 


10.72 


17.55 


30 


47.55 


H 


Fancy worsted... 
Unfinished wor- 


1.398 


.8997 


.47 


.286 


.184 


33.62 


31.79 


13.16 


20.45 


30 


50.45 




sted 


1.684 
1.471 


1.086 
1.052 


.47 
.521 


.265 
.301 


.205 
.220 


27.91 
35.42 


24.40 
28.61 


12.17 
14.96 


18.88 
20.91 


30 
30 


48.88 


J 


Fancy worsted... 


50.91 


K 


do 


1.782 
1.638 


1.10 
1.053 


.522 
.558 


.288 
.31 


.234 
.248 


29.29 
34.07 


26.18 
29.44 


13.13 
15.14 


21.27 
23.55 


30 
30 


51.27 


L 


Fancy serge 


53. 55 


M 


Fancy worsted... 


1.846 


1.232 


.486 


.275 


,211 


26.33 


22.32 


11.43 


17.13 


30 


47.13 


N 


do 


1.728 


1.208 


.468 


.257 


.211 


27.08 


21.27 


12.21 


17.47 


30 


47.47 



The same method of computation has been followed in Table 14 
with regard to German costs. These have been averaged in a simdar 
manner, showing the supposed need of an average tariff duty on the 
process of cloth making amounting to 19.28 per cent. Adding this 
to the yarn costs it appears that the total average rate of duty 
required to protect against Germany would be 51 per cent, or, on a 
basis of 30 per cent yarn duty, 49 percent. If the same deduction of 
10 per cent were made as in the case of the other collection of samples 
the remaining duty would be 39 per cent. 

All these cloths were included under paragraphs 5 and 7 of 
H. R. 11019, vetoed by President Taft, at 40 and 45 per cent ad 
valorem. 



60 DUTIES ON WOOL AND atANUFACTTJEES OF WOOL. 

The average duty on German and English cloths, as figured above, 
if they wt3re to be combined in a weighted or true average, would 
be about 46 per cent. The rates in paragraphs 5 and 7 of H. R. 
11019 were 40 and 45 per cent respectively. 

3. Equalization of costs. — Further analysis of the table throws 
much light on the situation in respect to cloth cost in the United 
States and abroad and the rates of duty supposed to be necessary 
to equalize these costs. Considering the table without any refer- 
ence to the duties on yarn or the total tariff duties, and simply with 
regard to the data indicated as being necessary by reason of the differ- 
ence in cost of production, it is seen that very wide variations of cost 
difference are to be noted. Thus in column 11 showing the per 
cent of difference in conversion cost stated as an ad valorem per- 
centage of the English cloth cost it is seen that some figures run 
as high as 36^ per cent in England, while other figures lun as low as 
16.82 per cent. It is an obvious fact that a rate of duty which would, 
on the board's theory, protect the American manufacturer against 
English competition in one case would not be satisfactory in the other. 
A number of the sample cloths studied by the board show less than 
25 per cent, while several run higher than that. Analyzing the col- 
umn further, it is found that nearly one-half of the total number are 
below 25 per cent. 

There is no explanation of the reasons for the extreme variation in 
the board's report, but it would appear to be largely due to differences 
in the cost of the yarn stock. In columns 3 and 4 are given the cloth 
cost in the United States and in England, and in columns 5 and 9 
the cost of conversion in American and English miUs. While there 
are considerable differences in the conversion costs per yard, it 
seems evident from a study of the figures that the prmcipal foun- 
dation for differences between the United States and England is the 
variation in yarn-stock cost. It will be observed in columns 3 and 4 
that in the more expensive fabrics the difference in cloth cost is large, 
but that it does not necessarily follow that a disproportion of the great 
difference in conversion cost exists. For example, sample No. 46 
shows a cloth cost in the United States of $1.71, while in Great Britain 
the cloth cost is $1.10. Yet the conversion cost in the United States 
was 38.6 cents and in England 18.61 cents. 

Although there was a difference of 61 cents in cloth cost, this 
particular sample showed no greater margin of difference than 
did others. About 41 cents per yard was due to the difference in 
yarn-stock cost. In a similar way sample No. 12 shows a cloth cost 
m the United States of 64.9 cents, while in England the cost is 34.51 
cents, a difference of approximately 30 cents. The difference in 
conversion cost was about 9 cents, the conversion cost in the United 
States being nearly 17 cents. Thus of the difference in cloth cost 
fully 21 cents, or nearly one-third of the cloth cost in the United 
States, was due to differences in yarn-stock cost. Without going into 
this phase of the subject at greater length, it may be said generally 
that the higher differences in cost of production are due to the higher 
cost at which the United States is compelled to get its yarn, and 
that this, as seen in our sections on yarn and tops, is primarily 
due to the unequal working of the duty on raw wool, which works 
unevenly upon wools of different fineness and spinning quality. If 
such inequalities were removed much of the variation in differences 



DUTIES ON WOOL AND MANUFACTUBES OF WOOL. 61 

of cost between the United States and England would disappear 
and there would be a tendency to reduce differences in cost toward 
the level of the fabrics which show the lower differences. 

4. Variation hy countries. — The figures in Table 14, contrasted 
with those in Table 13, show that the amount of duty needed 
to equalize differences in production between the United States and 
Germany, are very much smaller than those needed to equalize 
differences between the United States and England. As there 
shown, the average percentage of difference in conversion cost, 
figured as an ad valorem of German cloth cost, is less than 20 
per cent, and in the case of one fabric runs below 15 per cent. 
This presumably shows that the cost of production in Germany is 
higher than in England, as compared with the United States. The 
comparison can not be an accurate one since the board's analysis 
of samples did not employ the same fabrics for competitive purposes 
in its study of conditions in Germany as in England, but the tendency 
may fairly be stated as already indicated. It is therefore worth 
noting that certain German fabrics show, according to the board's 
figures, necessity for a smaller amount of duty than for any of 
the fabrics included in the English list. This is doubtless due to 
conditions under which the raw material is obtained. For example, 
sample E, in Table 14, shows a cloth cost in the United States of 
$1.56, and in Germany of $1.13. The conversion cost in the United 
States was 41.3 cents, and in Germany 24.6 cents, or a difference of 
16.7 cents. This was a case where cost of raw material was decidedly 
high as compared with the cost of most of the raw material used in the 
English fabrics, and where the difference in conversion cost was there- 
fore a comparatively small percentage of the total cost. With this may 
be contrasted sample H, which shows an American cloth cost of $1.40 
and a German cloth cost of 90 cents, while the difference of conver- 
sion cost was 18.4 cents. Here the difference between the cloth cost 
between the two countries was 50 cents, as against the difference of 
43 cents in the case of sample E, but the lower basis of ad valorem 
computation in the case of sample H led to a relatively higher rate 
of duty — 20.45 per cent. Many of these wide margins of difference, 
not only between different fabrics in the same country, but between 
different fabrics in different countries, would be eliminated. If all 
were placed upon the same footing with reference to access to raw 
material, free raw material in the United States would probably 
give us a distinct advantage over some foreign countries that produce 
woolens, this difference being probably in not a few instances suflBi- 
cient to more than offset the differences in conversion cost. Under 
present conditions, what is suJB&cient protection against one country 
IS not, according to the Board's report, sufficient protection against 
others, while an adequate duty directed against the products of the 
stronger competitive countries imposes an unnecessary disadvantage 
upon those which are thus placed under the obligation of paying a 
high rate of duty more than corresponding to the difference in cost. 

Keeping in mind the fact that there are many differences in cost 
among American mills themselves, the policy which imposes duty at a 
rate sufficiently high to protect against the most efficient mills abroad, 
levying the same rate on the goods which come from countries not 
so favorably situated with reference to raw material, gives large 
degree of protection to the products of American mills of the less 



62 DUTIES ON WOOL AND MANUFACTURES OF WOOLi. 

efficient class, and enables them to continue in business in certain 
classes of fabrics with costs of production that are needlessly high and 
that both might and would be very easily reduced, were they sub- 
ject to even a moderate amount of competition from foreign mills. 
While, as already stated, there is no reason to regard the sample 
study of the board as entitled to confidence, the results, so far as 
they indicate anything, emphasize the necessity for either assigning 
rates of duty on a basis to protect the most efficient domestic mills 
against the most efficient mills abroad or reclassifying fabrics with a 
view to lowering the rates upon those that can bear such cuts better than 
others. If either of these inferences from the board's figures as to the 
cost of sample fabrics were to be accepted, the rate of duty considered 
necessary for protective purposes woiud be greatly less than that which 
has already been indicated. 

E. READY-MADE CLOTHING. 

The board has investigated the subject of ready-made clothing, 
and has reported on this subject in Volume III (Pt. 4, pp. 843-946), 
in which is furnished information concerning men's and women's 
ready-made clothing, knit goods, etc. 

Discussing the cost of men's suits, (p. 860) it is found in the case of 
cheap suits ($8 and under) the material cost is about 47.1 per cent, the 
trimmings 13.7, or a total of 60.8 per cent. Manufacturing cost, in- 
cluding direct labor and factory expense, is 22 per cent, while overhead 
expense is 6.9 per cent and profit is 10.1 per cent. From this it is 
clear that the amount of tariff duty left upon the goods going into 
the suit itself should be the same to the extent of 60.8 per cent of the 
suit, as on the raw material of which it is composed. If there were a 
duty of 45 per cent upon the cloth and trimmings used in the manu- 
facture of a suit, this presumably should represent the rate of duty 
upon the finished product so far as that consists of the material thus 
made dutiable. In other classes of manufacture the method adopted 
by the board in estimating tariff duties has been to figure the differ- 
ence between the production cost, exclusive of material, in the 
United States and foreign countries, and then to add this difference 
as an excess tariff duty over and above the duty on the raw material. 

The question with reference to ready-made clothing is, therefore, 
whether 30 per cent of the costs of manufacturing clothing which is 
found to be due to labor and factory expense and overhead charges is 
greater in the United States than abroad. There is no definite 
information in the board's data regarding the cost of manufacturing 
clothing, inasmuch as costs do not appear to have been ascertained 
abroad upon the same basis. About all that can be said, therefore, is 
that so far as the board's information goes, there is no reason for 
increasing the tariff on ready-made clothing above the rate of tariff 
imposed upon the cloth and material out of which such clothing is 
made. The rate of duty fixed in H. K. 11019 upon ready-made 
clothing was 45 per cent, which was the highest rate given upon any 
article provided for in the bill except carpets (par. 1 7) . The board fur- 
nishes a number of indirect reasons for thinking that no excess duty is 
needed for the purpose of protecting the ready-made clothing indus- 
try against supposed excess cost in foreign countries. It states that 
the total annual manufacture of ready-made clothing in this country 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 63 

in 1909 was about $486,000,000 for men's and $385,000,000 for 
women's wear, making a total of more than $870,000,000. 

The amount of importations of ready-made clothing under the 
tariff law in 1910 was $1,776,236, and the amount which was 
estimated as likely to be imported under H. R. 11019, during 
a twelve-month period about $5,000,000. H. R. 11019 proposed 
to reduce the rate from 81.31 per cent (equivalent ad valorem 
for 1910) to 45 per cent. The fact is that ready-made clothing 
is an article which does not pass to any great extent into interna- 
tional trade, owing to the fact that there are large differences in 
styles between the countries, and that very large variations in cost 
may occur without greatly affecting the trade in such clothing. It 
is probable that a large proportion of the small amount of our 
imports of ready-made clothing at the present time represent the 
value of goods brought home by returning travelers, and have no 
relation whatever to the rates of the tariff. The board, moreover, 
makes it clear that probably one-third of the existing retail price of 
ready-made clothing represents charges for retailing, advertising, etc., 
aU of which items are probably the subjects of competition and need 
not be provided for in the tariff as the subjects of special protection. 

Very little attention need be given to the board's estimate of the 
cost of different elements entering into the manufacture of differ- 
ent garments. The inquiry of the board was conducted entirely by 
the sample method, and may, or may not, have represented the gen- 
eral average cost in the industry. It is an interesting fact that in 
analyzing typical suits, the cost of Ohio wool has been used as the 
basis for the computation, notwithstanding the fact that the Ohio 
wool does not sell in the market any higher than wool of similar 
quality from other sources, although its expense of production was 
found to be very much greater than wool grown in the States farther 
west. Therefore, so far as the board's incomplete data on ready- 
made clothing afford light upon duties, they would appear to indi- 
cate a tariff identical with that on the cloth used in making the 
clothing. 

F. KNIT GOODS. 

In connection with its discussion of ready-made clothing, cost 
analyses are given by the board (pp. 911-946) with reference to 
sample knitted garments, such as sweaters, mittens, etc. Here, as 
in the case of the ready-made clothing, comparative data for for- 
eign countries are absent. The analysis is made from the establish- 
ments of the United States and the effort of the board has been to 
segregate the different items of cost, so as to show the cost of stock, 
labor, and factory expense. The general showing made by the board 
is that the materials used consist of the coarser grades of yarn, while 
the processes of manufacture are apparently less costly than those 
prodiicing cloth. Thus, for example, in the sample study made by 
the board it was found that, for instance, in sampyle 49, the stock cost 
of the sample was 94 cents per yard, while American conversion cost 
was 40 cents, making a total cloth cost of $1.34. In English mills 
the yarn for a yard cost 61 cents, and the manufacturing cost was 
15 cents, giving a total cloth cost of 76 cents per yard. The labor 
in the conversion cost for the United States was round to be 21.3 cents 



64 DUTIES ON WOOL AND MANUFACTUEES OF WOOL. 



E 



er yard. Contrasting this with the Cardigan jacket, taken by the 
oard as a sample in the knit-goods investigation (p. 920), it was found 
that the cost for stock and trimmings in a dozen garments was 
$11.68, while the conversion cost was $8.16. The total mill cost, 
therefore, was $19.84. 

In the United States the labor outlay for converting yarn 
(No. 49) into cloth was about 16 per cent, while in the case of the 
knit goods the labor outlay was about 30 per cent of the total. 
The labor outlay on sample No. 49 was, however, about 54 per 
cent of the actual conversion cost from yarn to finished goods, 
while in the Cardigan jackets it was about 70 per cent. In their 
samples it appears that the labor cost of conversion is about two- 
thirds of the total cost of conversion, while numerous instances are 
given by the board in which the relationship between labor cost of 
conversion from yarn to finished cloth is substantially the same, 
or is higher. There appears to be no reason, therefore, for assuming 
that any larger allowance for protection should be made upon knit 
goods than upon ready-made clothing or fabrics. The knit goods 
are made from the lower and coarser qualities of yarn, and there is 
less difference in the cost of production, probably, of such yarns 
between the United States and foreign countries than there is on the 
finer yarns when labor and capital costs are considered. The fair 
inference would be, therefore, that the duty required on the knit 
goods would be less than the duty called for upon fabrics. 

G. CARPETS. 

No data whatever are furnished by the board with reference to 
carpets except a few general statements concerning the position of 
the industry in Volume I (pp. 169-188). These statements are 
purely descriptive of methods of manufacture, amounts of importation 
and exportation, etc. The tariff history with reference to carpets is 
given. The board points out (p. 169) that the difficulty in fixing tariff 
rates on carpets has been to arrange matters in such a way that the 
rates should prevent the introduction of third-class wool and its use 
as a substitute for clothing wool. This is a difficulty which grows out 
of the application of specific duties, with considerable variations in the 
amount of wastes produced in the process of manufacturing, etc. 
If an ad valorem duty is levied upon third-class wools upon the same 
basis as on the first and second class, the difficulties arising out of varia- 
tions in compensation involved in the specific-duty system are 
removed. Assuming that the ad valorem charge on carpet wools is 
the same as on other wools, two questions arise in connection with 
tariff duties (1) whether the relation between the raw material employed 
in the manufacture of the finished product bears approximately the 
same relationship to the value of labor in carpets as is the case of 
fabrics made from the finer wools, and (2) whether the industry 
employs about the same proportion of tax-free materials as does that 
which deals with fabrics. 

On these points the board furnishes little or no information, and 
what it does furnish is incidental to its discussion of other phases of the 
industry. The conclusion to be drawn from the statistical matter 
furnished is that, owing to the use of raw materials other than wool, 
which are dutiable at a much lower rate, or are free of duty, there 



DUTIES ON WOOL AND MANUFACTUEES OF WOOL. 65 

is much less reason for the levying of duties at the same rate on 
carpets as upon fabrics. The fact that the raw material is so much 
less^ valuable than in the case of the fabric, tends to reduce the 
value of the stock cost as compared with the labor cost entering the 
product. If these two factors be considered to offset each other, in 
a measure, the rate of duty on carpets might be regarded as about 
the same as that placed on the coarser fabrics, whatever that may 
be. In proportion as the quantity of materials other than wool 
increases, the amount of nontaxed material in the goods also increases, 
and hence the aggregate amount of duty, which has been sustained in 
turning out a product of a given value, is reduced. How great a reduc- 
tion this should permit in the rates of duty as compared ^vith the maxi- 
mum rate to be authorized upon the best grades of carpets, can not 
be stated on the basis of anything contained in the report of the board. 

The board's report, however, shows a materially smaller difference 
in cost between the United States and other countries with respect 
to the coarser varieties of carpets, which employ less labor and 
capital relatively to the amount of material included in them. 
The lower counts of yarn have a decidedly lower cost of production, 
both absolutely and relatively, than do the higher counts, employed 
in the manufacture of the better grades of fabrics. The inference 
to be drawn, therefore, from this part of the report is that a 
reduction in the rate of duty on the lower grades of carpets, not 
only because of the smaller proportion of taxed materials in them, 
but also because of the fact that so much less actual labor is 
employed, unit for unit, in their production. The rate of reduc- 
tion in the duties on carpets, below the maximum rate assigned 
to the best grades of carpets, can not, therefore, be measured 
as a percentage of the amount of duty charged over and above 
the rate on raw wool. This would be true only if carpets were 
composed exclusively of wool, or at all events, in the same pro- 
portion that holds good of the other fabrics. Where the use of 
other raw materials has entered this is not the case. This situa- 
tion is recognized by the board in connection with its study of 
cloths, where it points out that its rates of compensatory duty apply 
to fabrics made wholly of wool (p. 626), but that the situation is 
different where cheaper materials are employed, while there is no 
test that will disclose the proportion of noils, shoddy, etc., to new 
wool in the many varieties of fabric. 

There is nothing whatever in the board's report which affords 
any reason for modifying or changing the rates on carpets fixed 
in H. R. 11019, in relation to the other rates fixed in that bill. 
Should a change be made in the rates on raw wool, tops, and yarns, 
as compared with those carried in H. R. 11019, reason would be 
afforded for changing the rates on carpets, but the former p-roducts 
remaining the same mere is nothing whatever to support a change in 
the rates in the carpet paragraphs. 

RECAPITULATION ON TARIFF BOARD REPORT. 

1. The theory of applying tariff duties according to the difference 

in the cost of production in this and in foreign countries, upon which 

the board has projected and prepared its report, is entirely erroneous 

and untenable. Furthermore, if this theory could have been system- 

S. Kept. 840, pt 2, 62-2 5 



66 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



atically and carefully applied, it would not have afforded trust- 
worthy results for guidance in preparing tariff legislation. 

2. The board's report is fragmentary and incomplete, and rests 
on an incorrect statistical basis. Hence it has no claims to confidence 
for the results set forth therein, even should the reliability of the 
theory of the cost of production be conceded. 

3. Those persons who are willing to overlook the lack of theoretical 
soundness and of statistical accuracy, will find the data of the report 
too fragmentary and incomplete to admit of conclusions with refer- 
ence to rates of tariff duty. Even under the most favorable inter- 
pretation of the report, conclusions as to duties can be reached for 
only a few paragraphs of the wool schedule, and for these paragraphs 
it is not possible to formulate definite conclusions, because the figures 
vary widely, and seriously lack uniformity and comparability. So 
much is this the case that justification is apparently afforded in the 
report for rates that are in conflict with one another. It is thus seen 
that the report leaves the question of the tariff duties on wool as much 
unsolved as before the Tariff Board was formed. 

4. So far as conclusions can be drawn from the board's report, it 
furnishes nothing to justify any change in the rates proposed in H. R. 
11019. With full recognition of the incomplete, fragmentary, and 
unsatisfactory nature of the data, and with full admission of the 
inadequate and unreliable basis afforded for computations, the follow- 
ing table may be regarded as setting forth, as well as it is possible to 
do, the conclusions as to the rates of duty justified by the report. 

Table 15. — Comparative equivalent ad valorem rates of duty in 1910 and 1911 with those 
of H. R. 22195, together with the rates computed from the Tariff Board report as equal- 
izing cost of production. 



Item. 



Unmanufactured wool 

Noils, wastes, shoddies, mungo, flocks, etc., and all other wastes 

or rags composed wholly or in part of wool, n. s. p. f 

Combed wool or tops 

Wool and hair advanced in any manner, n. s. p.f 

Combed wool or tops, and wool and hair advanced, etc 

Yarns made wholly- or in part of wool 

Cloths, knit fabrics, felts not woven, and all manufactures of 
wool, n. s. p. f 

Blankets and flannels 

Dress goods, women's and children's, coat linings, Italian 
cloths, bunting, and similar goods, n. s. p. f 

Clothing, ready-made, and articles of wearing ^parel of every 
description, including shawls, whether knitted: or woven, and 
knitted articles of every description, etc 

Webbings, gorings, suspenders, braces, bandings, etc 

Carpets and carpeting 



Ad valorem rates per cent. 



Equivalent, com- 
puted from im- 
ports of— 



1910 



44.31 

38.96 
111.73 

86.33 
105. 19 

82.38 

97.11 
95.57 

102.85 



81.31 
87.06 
60.65 



1911 



42.20 

34.99 

89.93 

»89.93 

76.61 

95.26 
93.66 

102. 11 



78.06 
84.76 
61.62 



H. R. 

22195. 



20 

20 
25 
25 
25 
30 

40 
30 and 45 

45 



45 

35 

25-50 



Comput- 
ed from 
Tariff 
Board 
report. 



0-25 

0-25 
5-30 
5-30 
5-30 
12-45 

32-70 
32-70 



32-70 



» Combed wool or tops not reported. 



s No d^ta furnished by TariS Board. 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 67 

In making the computations from which have resulted the rates 
shown in Table 15, as justified by the Tariff Board's data, the most 
expensive and difficult conditions indicated by the data as attending 
production have been employed with a view to being more than just 
in the conclusions. As will be observed from the figures shown, the 
necessity of protection to equalize the difference in the cost of pro- 
duction beyond the rates carried b}^ H. R. 11019 exists in but few 
instances, and these are in all probability the result of the high costs 
which have been presented and used by the board in the computations. 

5. In preparing H. R. 11019 of last session and H. R. 22195 
of this session no intentional provision was made for protection, 
the endeavor being to reduce and adjust rates so as to produce 
the largest amount of revenue consistent with the proper considera- 
tion of the consumer. It is believed that the rates of this bill 
approach very closely, at least, to the best revenue-producing 
points, and these rates should, if enacted into law, permit such 
quantities of imports as will effectively regulate domestic prices. 
Such competition would be an important service to the people, as it 
would encourage increased consumption and production by making 
more nearly normal the conditions of supply and demand. The 
report of the Tariff Board, so far as it admits of conclusions, shows 
that the rates which meet the consumer's needs also sufiiciently 
satisfy those of the producer. 

Revenue of H. R. 22195. 

As the committee is resubmitting to the House the bill presented 
at the last session of Congress, with no change of basis or rates, no 
change in its revenue estimate is called for. In the following table 
is presented with other data, the results of the computation fur- 
nished in the report which accompanied H. R. 11019 (H. Rept. 
45, 62d Cong., 1st sess.) . 



68 



DUTIES ON WOOL AND MANUFACTURES OF WOOL. 



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35 OQQ 



70 DUTIES ON WOOL AND MANUFACTURES OF WOOL. 

As indicated in Table 16, the committee estimates that the duties 
during the first 12-month period under H. R. 22195 will amount to 
$40,556,016, which compares with $41,904,850 for 1910 and 
$28,982,553 for 1911. It is believed by the committee that no loss 
in revenue will result from the enactment of H. R. 22195, but that the 
bill will produce probably as much as in 1910, while at the same 
time the yearly burden resting upon the people owing to the cost of 
woolen clothing will be reduced by more than $50,000,000. 

THE FORM AND PHRASEOLOGY OF BILL. 

The phraseology of the bill H. R,. 22195 conforms throughout to 
that of H. R. 11019, which is practically the same as that of the act 
of 1909. In framing the bill the purpose of the committee has been 
to make no change in the language used in enumerating and describ- 
ing the articles included under its provisions, except such as is 
necessarily involved in the omission of the provisions for the classifi- 
cation of raw wools, admixture of blood, the varying rates on washed, 
scoured, sorted, or skirted wools, etc., and the omission of subclassifica- 
tions according to value, weight, or dimension of most of the groups 
of manufactured articles. The exclusive use of ad valorem duties 
obviates the intricate and complex qualifications, differentiations, 
and discriminations of Schedule K of the act of 1909. Ad valorem 
duties automatically adjust themselves to all these distinctions. 

The enacting clause of the bill conforms exsictlj to that of the 
tariff act of August 5, 1909, of which the bill is practically an amend- 
ment, in order to avoid any possible ambiguity or conflict with 
regard to the insular possessions of the United States. The ware- 
house provision (sec. 2) also conforms exactly to the corresponding 
provisions in the act of 1909 (sec. 29), except that the provision for 
levying duties based on weight at the tirae of the entry of the mer- 
chandise is omitted, since the bill H. R. 22195 provides for no duties 
based on weight. Under this warehouse provision, as in the present 
act, articles in warehouse when the bill H. R. 22195 takes effect, on 
which duties have not been paid, shall be subjected to duty when 
withdrawn as if they had been imported after the taking effect of 
the act; but articles in warehouse on which duties have been paid 
and a permit of delivery issued, shall be subject to the duties imposed 
prior to the enactment of the new bill. 

J. W. Bailey. 
F. M. Simmons. 
Wm. J. Stone. 
John Sharp Williams. 
Jno. W. Kern. 
Charles F. Johnson. 

O 



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